Newsletter Watch: Chinese media plays
This week, we examine a pair of small-cap media plays in China: a broadcaster (providing financial content) and a recruitment firm that publishes one of China's leading newspapers and websites for job seekers.
"With a recession nipping at our heels here at home, is it even possible to find an undervalued, bubble-proof Chinese stock these days?" asks Jonas Elmerraji in The Penny Sleuth.
"One company is looking pretty salacious for the American investment dollar right now: Xinhua Finance Media Limited (Nasdaq:XFML)," he says. The stock has a market cap of $282 million.
The company, he says, is a media operation that creates and broadcasts finance and entertainment content to millions of Chinese people. But, he adds, "Here's the kicker: the company targets high net worth individuals in China. We're talking professionals who can give advertisers the most bang for their buck (or yuan, as the case may be)."
XFML is an "interesting story," he says, because it takes middle-class Chinese consumers on "from all sides," including print, TV broadcasts, online ads and mobile devices that reach more than half a billion people.
"And management's no slouch either. Their CEO was chosen as one of The Wall Street Journal's Top 50 Women in 2004," Elmerraji says.
The company has only been listed here in the United States for the past year, but he says it’s already posted positive earnings, a double-digit profit margin, and some impressive net assets on the books. "How impressive?” he asks. “More than $6 per share."
Elmerraji also considers the stock to be recession-resistant. "One thing that makes Xinhua Finance Media unique is the fact that it’s selling financial news, a service that gets even more eyes on it when the economy is in a slump," he says.
"What's not to like?" he asks. He cautions that much of the firm's assets are made up of intangibles. As such, he questions, "Can their figures hold up to scrutiny in a bad market?"
He says that with a low P/E and a share price hovering around $3 and change, there's "a lot to like about this stock." Indeed, he says, "Xinhua Finance Media looks like one of the cheapest Chinese plays out there. Even a conservative analysis puts XFML above the $5 mark in the next couple years."
Our second small-cap China play (with a market cap of $502 million) comes from Jim Trippon, editor of The China Stock Digest. The China job search company, 51job, Inc. (Nasdaq:JOBS), is often compared to Monster.com.
The company, he says, operates through its Internet portal and by publishing 51job Weekly, a leading employment paper distributed in more than 23 major cities throughout China.
Each edition of 51job Weekly, he says, is included as an insert in local newspapers carrying both local job listings and advertising. According to Trippon, the company derives most of its revenues from employers placing job advertisements in 51job Weekly and from its 51job website.
Trippon says that the company beat all analyst expectations with a recent earnings report, showing "dramatic" increases in revenue and profits for the fourth quarter of 2007 and for the full year.
For 2007, he says, the online recruitment company booked revenue growth of 21% to $124 million while net profit was up 11.7% to $15.6 million.
He explains, "China has now surpassed the U.S. in the number of Internet users online. But usage of the Net for commerce and other functions like job seeking and travel booking is still in its infancy. With such a huge market and growing penetration we see bright prospects in this sector. 51job connects millions of Chinese job seekers with tens of thousands of companies."
He concludes, "The long-range outlook is for substantial growth in a business sector that is still in its infancy and growing very rapidly."
To read more of Trippon’s take on Chinese small caps and the Chinese economy, read parts one and two of our “Cashing in on China” interview.
For 25 years, Steven Halpern has conducted an annual survey asking the leading newsletter advisors to select their favorite stocks for the year. His 2008 report features 120 top picks. You may download the report for free by clicking here.
"With a recession nipping at our heels here at home, is it even possible to find an undervalued, bubble-proof Chinese stock these days?" asks Jonas Elmerraji in The Penny Sleuth.
"One company is looking pretty salacious for the American investment dollar right now: Xinhua Finance Media Limited (Nasdaq:XFML)," he says. The stock has a market cap of $282 million.
The company, he says, is a media operation that creates and broadcasts finance and entertainment content to millions of Chinese people. But, he adds, "Here's the kicker: the company targets high net worth individuals in China. We're talking professionals who can give advertisers the most bang for their buck (or yuan, as the case may be)."
XFML is an "interesting story," he says, because it takes middle-class Chinese consumers on "from all sides," including print, TV broadcasts, online ads and mobile devices that reach more than half a billion people.
"And management's no slouch either. Their CEO was chosen as one of The Wall Street Journal's Top 50 Women in 2004," Elmerraji says.
The company has only been listed here in the United States for the past year, but he says it’s already posted positive earnings, a double-digit profit margin, and some impressive net assets on the books. "How impressive?” he asks. “More than $6 per share."
Elmerraji also considers the stock to be recession-resistant. "One thing that makes Xinhua Finance Media unique is the fact that it’s selling financial news, a service that gets even more eyes on it when the economy is in a slump," he says.
"What's not to like?" he asks. He cautions that much of the firm's assets are made up of intangibles. As such, he questions, "Can their figures hold up to scrutiny in a bad market?"
He says that with a low P/E and a share price hovering around $3 and change, there's "a lot to like about this stock." Indeed, he says, "Xinhua Finance Media looks like one of the cheapest Chinese plays out there. Even a conservative analysis puts XFML above the $5 mark in the next couple years."
Our second small-cap China play (with a market cap of $502 million) comes from Jim Trippon, editor of The China Stock Digest. The China job search company, 51job, Inc. (Nasdaq:JOBS), is often compared to Monster.com.
The company, he says, operates through its Internet portal and by publishing 51job Weekly, a leading employment paper distributed in more than 23 major cities throughout China.
Each edition of 51job Weekly, he says, is included as an insert in local newspapers carrying both local job listings and advertising. According to Trippon, the company derives most of its revenues from employers placing job advertisements in 51job Weekly and from its 51job website.
Trippon says that the company beat all analyst expectations with a recent earnings report, showing "dramatic" increases in revenue and profits for the fourth quarter of 2007 and for the full year.
For 2007, he says, the online recruitment company booked revenue growth of 21% to $124 million while net profit was up 11.7% to $15.6 million.
He explains, "China has now surpassed the U.S. in the number of Internet users online. But usage of the Net for commerce and other functions like job seeking and travel booking is still in its infancy. With such a huge market and growing penetration we see bright prospects in this sector. 51job connects millions of Chinese job seekers with tens of thousands of companies."
He concludes, "The long-range outlook is for substantial growth in a business sector that is still in its infancy and growing very rapidly."
To read more of Trippon’s take on Chinese small caps and the Chinese economy, read parts one and two of our “Cashing in on China” interview.
For 25 years, Steven Halpern has conducted an annual survey asking the leading newsletter advisors to select their favorite stocks for the year. His 2008 report features 120 top picks. You may download the report for free by clicking here.
About the Author
As a newsletter editor and financial journalist, Steven Halpern has covered the investment newsletter industry for 25 years.