china mediaexpress investor day conference, sept. 7, 2010
DESCRIPTION
CME operates the largest television advertising network on inter-city express buses in China. CME generates revenue by selling advertisements on its network of television displays installed on express buses originating in nine of China’s regions, including the four municipalities of Beijing, Shanghai, Tianjin and Chongqing and five provinces, namely Guangdong, Jiangsu, Fujian, Sichuan and Hebei.TRANSCRIPT
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Agenda
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Background of CCME - Chairman and CEO
Sales and Marketing - CMO
Network Coverage and Technology - COO
Financial Highlights - CFO
CME Corporate Strategy - Chairman and CEO
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uuuuuuuuuuuuuuuuuuuuAgenda
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ut l
Background of CCME - Chairman and CEO
F Sales and Marketing - CMO
) Network Coverage and Technology - COO
) Financial Highlights - CFO
> CME Corporate Strategy - Chairman and CEO
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uu u u u ll u u u u u u llu u u u u u u uu u uuulluuuuuu uExecutive Summary @t39dd?e3€
CCME is the market leader in television advertising on inter-city and airport expressbuses in China. The annual passenger flow is over 1 billion
Founded in 2003, CCME is now one of the top ten outdoor media companies and one ofthe top one hundred media companies in China
CCME was listed on AMEX in 2009 and transfer its listing status to the NASDAQGlobal Selected Market in Tune 2010
Inter-ciry bus
L5,260
10,053
CAGR
,o,ru, 22,339 nsvo
55 z1oto
1-6'1270/o
Airportbus
Jun-10
0nillion)$120
$100
$80
$60
$40
$20
$-'1,L2
2006 2007 2008 2009 Jun-10
2006 2007x Revenue ($ million)
3 Net Profit ($ million)
2008 2009 1H'10
CAGR = 1490/o
CAGR = 2080/o# of Buses --r- # ofBus Operators * # ofRegions
3
uuuuuu u u u u uu uu u uuu u u uuuuuuuuuuuuultMission and Goal @ g9$? ;
Provide excellent travelling experience to business travelers and tourists
Allow each passenger to receive advertisers' messages in an easy manner
. Provide right target demographics and effective sales channels to advertisers
' To be the largest new media company in China; to allow all the passengers hear
CCME's voice in all transportation means
' Enhance the value of CCME, innovate and develop diversified and multi-dimension
media platforms, in order to provide an economic yet effective media platform, and
become the best new media group in China
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r i l r . r u uu u u u u u u uu u u u u u u u u u u l lu l l uu uuuu uInvestment Highlights @ E{iii,a'*a
out-of-home media is the second larges.[ m-edia platform in China. l t is rapidly growrngand CAGR is expected to be over 201/o in the nelxt three years
. ' "
The market leader for television advert ising on inter-city and airporl express buses inChina; dominant market posit ion
Provide advertisements and entertainment programs that enhance media effectiveness
strong advert ising agency and direct sales channel covers 16 municipal i t ies orprovrnces - Over 30 advert ising agencies and over 500 advert isers ^
t:Slgwledged by various multipre international brands and large nationar bandsover the vears
stable and sustainable growth during the track record and in the future
Effective execution capability of the management team
uuuuuu u u u u uu uu u uuuuuuuuuuuuuuuuuuuCompetitive Advantages @S .ii$?.,,
Media Company ffi*i,'x s.i."""j.rt FOCUS t iililEFlE it iH *[
Network Platform Inter-city Bus
AirpoltBus
lntra-cityBus
Subway Airlines Airports Building Home TV
Cost - CPM as o/o ofLocal TV CPM -3% -50% "r0%-20% -207, '10% -10% -55% 100%
Rate Card ($'000, 30sec, monthly,Beiiine)
$49 $491 $247
Opelating Malgin(TTM as of Jun-10)
62% -4.6% -22.1,% -8.6%
With non-adPrograms (Y/N) Y Y Y Y Y N N N
Ave. ContactDuration (min) 150 60 30 30 150 80 2 Various
No. of Passengels(milliony'day)
2.7 0.2 25 15 'l 1, 250-300 Broadest
Level of Captivity H H M M H M M H
Souh.e: Canpa V tstinat!
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Otganizational Chart
u u u u u u u u u u u u ll u u uuull llI media a*nr 'i express
Internal Audit(Chende XIAO)
Vice GM
Board
GM(Zheng CHENG)
cFoWeiiiLIN)
FinancialController (Finance)(Zhuofeng ZHEN)
Ac€ountingDepartment
Vice GMVice GM (Admin.)(t Jeisheng LU)
(Techmology)(Biaoxing CIIEN)
(Mark,:ting)(]inlong DU)
Vice GM(Customer Ser:vice
& Purchase)flian YU)
Customel'J:i::'x.1!'-: service
Department
No*h China PurchasingSales Office Depa*ment
South & 5WChina Sales
Office
Admin.Department
HRDepartment
CEO Office
ProductionDepa*m€nt
PlanningDepa*ment
EngineeringDepartrneni
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uuuuuuuuuuuuuuuuuuuuGrowth Strategy @;Bi$?H;
Further expand the network coverage through both organic growth and dcquisitions
Provide diversified media products: increase embedded advertisement and developother fypes of products
Extend advertising media plafforms: improve airport express media network andestablish tour buses media network
Improve customer services and technical support to enhance customer loyalty
Further strengthen relationship with bus opelators
Promote international management standard, development an elite managementteam
Enhance corporate core value
uuuuuuuuuuuuAgenda
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,} Background of CCME - Chairman and CEO
) Network Coverage and Technology - COO
)' Financial Highlights - CFO
> CME Corporate Strategy - Chairman and CEO
,} Sales and Marketing - CMO
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uuu uuu u u u uuu uu u u u u u uu u uu u uu uu uEEullBusiness Overvrew I media rtrr'"
express
r CCME operates an advertising media network targeting the havellingpopulation
Network Target Audience
Inter-city Buses. Connecting tier 1, 2,
and 3 cities. Average journey time
around 2.5 hours
Airport Express Buses. Connecting airport and
the cities. Average journey time
around t hour
Average age 30 ,male is themajorityFor business or tourism purposeMid-to-high income group
PMEB group (Professional,Management, Executives,Businessman) is majorityHigh education levelHigh income and consumptionlevel group
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uuu u u u u u uu uu u u u u u uuuuuuu uuuuuul l l luuAd Format @ts 3i$?H5
r We provide three formats: regular ad, embedded ad, theme ad
Regular Ad. Broadcast Frequency: 10 minutes advertisement
time slots after every 30 minutes program. Ad slot: 5, 10, 15,30,60 seconds. 20.5 minutes regular ad sold every month
Embedded Ad. Broadcast Frequency: blended in the 30 minutesprogram broadcast
. Type: chamel ent i t lemenl, special jo intent i t lement, screen switching ent i t lement, studiobackground entitlement
. Ad slot: 5, 10, 15, 30, 60 seconds
.6.7 minutes embedded ad sold every montha
Theme Ad-Broadcast Frequency: Broadcast once the busengine startsAd slot: 60 seconds5 minutes theme ad sold every month
By multiple adformats, weProvide multipleproduct selectionsProvide tailor-madeproducts andservlcesImprove mediareach and adawarenessIncrease tevenuewhile ensuring the30 minutesbroadcasting ofnon-ad program
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u u u u u u u u u u u u u u u u u ll u u ll u u ll u u ll u u ll ll ll ll uSales Model @ si$?a-J3
r Our sales model is to not only develop and maintain agent channel, butalso actively develop our direct sales channel
. Develop clients thatdo regiornl mediabuy, such as AierOphthalmology ,Haier and ChinaTelecom provincialsubsidiaries
. Sell 21 minutesadvertising timeevpnr n.rnnth
i;;;;; Ii+-:"*:1 i
Sales Team. 113 salesmen are stationed in 14
sales center as of June 2010. Provide service to agencies,
m€anwhile actively seeking directaovefflsefs
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Develop clients whodo national mediabuy, such as Industrybank, Micoe, AlibabaSell 11.2 minutesadvertising,timeevery monrn
Sales Agencies. Over 30 agencies as of june 2010,2-4
agencies in each region. Ihe average vear in co-operdtion is
.z.5 years. All aggncies are major regional
aovertrsmg compames. Annual media purchase contract,
monthly settlementSerwe agents e.g., feedback onbroadcasting monitoringVisit each asent 2-3 times
uuuu u u u u uuuu u u u u u ll u u u u llu u uu q uuuuuuAdvertisers @ml8i$?aH'
r Our advertisers are national brands mainly in F&B, telecom and apparelsectors
Advertisers (Selected) Top Ten AdvertisersRar-rk 2009 1H', 10
Brand Sector Ad minutes Brand Sector Ad minutes1 CMCC Telecom 40.28 China
Telecom Telecom 60
2 Coke cola F&B 36.33 cMcc Telecom 58.53 Unit?resent F&B 36.08 Coke cola F&B 52.5
4 ChinaTelecoli Telecom 36.08 Unit-present T&B 5L.75
5 Pepsi F&B 33.33 Pepsi F&B 496 Master Kong F&B 27.42 Eratat Appalel 47
7 Eratat Apparel 20.25 Xiduoduo F&B 39.5
8 Xiduoduo F&B 18.00 Master Kong F&B9 GuJingcong F&B 17.83 CuJingcong F&B 29.5
10 Rejiaman Health careDroducts
L7.33 Seven wolf Apparel 28.5
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SIEMENS
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Advertiser's VoicePepsl;ChinaMediaExpIess@byitslargescaleinte1-citybusnetwoIk,whichishighly helpful to our sales exparsion.
CMCC: China MediaExpress' network penetrate large target audience precisely. It fits our products very well.Leaozo: ChinaMediaExpress' media cost is much lower than traditional media, which is the main reason that we chose CME
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u u u ll u u u u u ullu u u u g u u u u ll u u u u u u s u u llu ll uMedia Advantages I media rrrr"
rexpress
r High media reach and ad awareness
> Media reach of inter-citv bus TV is 1.28 times of ftaditional TV and 2.18 times ofintra-city bus TV
> Media reach of airport bus TY is 90%, i.e.,90% of surveyed passengeis claimedthat they watch advertisements on airport bus TV in the previous month
> Take China Mobile for example, 82% ol suweyed passengers claimed that theywatch China Mobile's advertisements on CME airport bui TV in the one morrih
r LowCPM
> CME's CPM of 15 seconds ad timeslot on inter-city buses is $0.5 (-RMB3.5) in first half 2010, which is -3% ofCPM of local TV station
Source: CTR research; managetnenl estimate
CME airport shuttle
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u uu u u u u u u u u u u u u u u u g u u u lt u u u u u u lturruuAgenda @ Big?Hs
,} Background of CCME - Chairman and CEO
P Sales and Marketing - CMO
)> Financial Highlights - CFO
F CVIE Corporate Strategy - Chairman and CEO
Network Coverage and Technology - COO
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u u u u u uu u u u u u u u ll uuuuuuInter-city Bus Network @ i:. t.',,i,.': r,s,, *,
# of inter-cify buses Established national inter-city busmedia network
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CP,GY?20,161 22,239
15,26010,053
Jun-10
# of regions covered
CAGR=4I
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u u u u u u uuu u u u u u uuuu u uuuuuuuultuuuAirport Shuttle Bus Network @ gl$'.agg
# of airport shuttle buses
Jan'10 Feh'I0 Nlor'l0 .\pr'I0 NIaS'IO Jun'ltt
# of regions covered
Jan'10 Feb'10 Mar'10 Apr'10 Vay'10 fun'10 @ Expanded in Sept 2010
expandin airport shuttle busmedia network
As of June 2010
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u u u u u u u u u u u lt u u u u u u u u u u u u uln [[[[[[FBus Operator Co-operation Model @B:8i$?ffii
CopyrightProsram
r Copyright programs andself-made programs toimprove our credibility
lF th ! jif.
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r Long-termrelationship
10,0008,0006,0004,0002,000
0
# of buses bv vears of co-opg!44e48,010
4,562
602 524
5 Yeals 4Yeals 3 Yearc 2Y€ars lYear <:L Year
# of bus op,C!4telqbyfe4lq of co-operation
0
5 Yearc 4 Years 3 Yearc 2Yearc l Year <1 Year
2520
1050
21,6,721
10
Economic Benefits
I To provide stablesupplementary income to busoperators
ComfortableEnvironment
r Various popularentertainment programshelps to attract passengers
rcnrcffiffinaffi
uuuuuTechnology Advantages @Ei$?aJ;
Startup withVehicle
MemoryPlaying
MandatoryCommercialBreaks
InvalidationRemoteController
USBPasswordProtection
Tl-Ie video port is directly comectedwith the power switch of electrical doorlock on each bus, and the programmingstarts when the bus engine is tumed on.
When d1e bus enters the service and thebus dnver turns the engine ofl the videowill stop playing. The program andadvertisement will resume as soon as theengine is tuined on again to ensurecontlnulry,
Each advertising time slot isprogrammed duougll a passwordprotected electronic chip.
The broadcasting system is anaulomdted -) -tem whicl l docs nol dl lo!.the ddver to manually tum it off or fast-forward when adveftisements are shown.
A11 programs and advertisementsuploaded in the broadcasting system aresafely plotected by a unique password.
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uuguulruuuuuuguCustomer Service @S"olAi;
. Daily on-sitemonitoring
. Monitoring dataprovided by third-party institution(CTR): CTR providesad broadcastingmonitoring report tocustomers on the 10thof every month.Industry standardsampling approach toensure valid results
B0 engineering staffsare stationed at 16operation centersacross the nation
Upload programsmanually; piloting thewireless uploadingtechnology, in order to
FAchieve real-timeprogram update
Flmprove efficiency
FSave labor cost.800/400 hot lines, website feedback
. Professional after sales service staffs
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Agenda
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) Background of CCME - Chairman and CEO
) Sales and Marketing - CMO
,} Network Coverage and Technology - COO
) Financial Highlights - CFO
> CME Corporate Strategy - Chairman and CEO
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uugguuul luuuul lEEuCCME Historical Income Statements @mt8fi$?H:
WTEEEEEE63.0
37.9
(i0%o
(2.8)
35.1
37.9
)6 '
120/rt
95.9
63.0
660/0
(6.4)
56.6
59.8
47.7
130/o "lo/o
I='tol I"- ' " I
IL;oo/o I
I60/o I
I1290/o I
6-lo/o
58%
590/o
:-*t
98,0
68.7
70%
(6.2)
62.5
64.5
46.7
Jt]0/o 6%
15s"/"1I'1920/o I
*^l22(ir/rl
1"890/o
L79o/o
-1980/o
37.8
(;2%
(1.e)
27.6
23.7
75.7
I o.rr..r.r""
I Gross Profit
I cros" tr't*gin
I operating Expenses
I op."utirlg Income
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u I u l l u u u u l l u l l u I t t I t r utrrr
CCME Historical Balance Sheets @a"Farc'
Cnsh mul Ctsh Equk'tlents
Accttttrrt s Rcceirable
Tottl Cut'etrt Assets
Tottl Assets
Liabilities
(:tt 'r'ertt Litlt ilit ies
tqq
6.1
36.1
49.7
7.8-t4.7
35.0
49.7
57.2'
12.6
70.o83.0
28.6
35.3
47.7
83.0
139.3
20.7
1.63.4
188.7
/ . / .J
37.7
150.9I rnt"t Litttitities 1fShareholders'Equity 1r l
ITotal Liabi l i t ies and Shareholders' Equity .-__'*-
. --- ' ' - ,188.7
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uuuuuuultuuuuEuuCCME Key Financials
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r CCME has exhibited strong revenue growth and profitability
$100.0
$80.0
$60.0
$40.0
$20.0
$0.0
Net Revenue ($ million) Net Income ($ million)
$4L.7
2008 2009 1H'10 2010 E
$100.0
$80.0
$60.0
$40.0
$20.0
$0.0
$26.2
1H'09 1H',10
$46.7
$15.7
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u uu u u u u u u uuu u u u u uuuuuu uu uuuu uIurruuIncome Statement Analysis - Revenue @lsi$?a'ii'
Revenue Breakdown by Revenue Breakdown byBus Type Channel
1000/o
90o/o
80%
700/o
60%
50%
4U/o
300/o
200/o
l0o/o
oo/o
Inter-city Buses
I Airport Express Buses
2007 2008 2009 1H10AgentSales
I Dfuect Sales
Revenue Breakdown byAd Format
700%
9ln/o
80%
7On/o
5lo/a
500/o
4Do/o
300/o
200/o
100/o
Oo/o
100%
900/o
800/o
700/o
600/o
50o/o
40n/o
300/o
mok
100/o
0o/o
2007 2008
Regr:lar AdI Theme Ad
2009 1H10
I EmbeddedAd
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uuur,t u u u u u u u u u u u u u u u u u u u u u tt rt u u uuuIncome Statement Analysis - Revenue @r39$?K$
Average Monthly Revenue($ million) & YoY Growth
15.0
10.0
qjt
2007
ll ll
Inter-citv Bus Media
c*9PfiLz.9
2009 1H'10
Average Monthly Sales ($ million) +Growth
2007"
150%
5.0
"100%
50%
0%
2008 1H'10
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u uu q u u u u rt u u u u u u u u uu u u u u u uuu u uuurruuIncome Statement Analysis - Revenue @8,.Fau
Revenue Driver I -# of Buses (End of Period)
Inter-city Bus Media
2007 2008 2009 1H'10# of buses ('000 units)
-*- # of regions
Revenue Driver 2 -Ad Rate per Minute per Bus ($)
$19 $20
$19 $20
$2.5 $2.4a-..*
Revenue Driver 3 -Ad Minutes Sold @nd of reriod)
25
20
15105
20151050
t5
20
1510
02007 2008
+Regular Ad
-FTheme Ad
2009 1H'10+-Embedded Ad
2007 2008+Regulai Ad..r-Theme Ad
2009 1H',10+-Embedded Ad
500400300200100
Airport Express Bus Media
1H',10# of buses (units)
1H'10
^ Embedded Ad
1H'10
^ Embedded Ad
400
300
200
100
0
20t5
1050
. Regular Ada Thene Ad
o Regular Adt Theme AdiF # of re
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u uu u u u u u l t u u u u u u u uuu u l lu u l . u uu q H qqr
Income Statement Analysis - Profit Margin@i3'$?eT3
r CCME has enjoyed high margins
Gross Profit & Margin Operating Profit & Margin
$80.0
$60.0
968.7
2008 2009 1H'09 1H'10Gross Profit ($ million)
-.* Gross Margin (%)
90%
80y.
70%
607.
$80.0
$60.0
$40.0
$20.0
2008 2009 1H'09 1H'10Operating Profit ($ million)
* oPerating Margin (%)
r l ts
$40.0
$20.0
$0.0 $0.050%
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qqu quuq q qqqq uquuqquqqqqquu uquuurrr tu@isi$?H;Operating Cash Flow and Net Income
$50.0
$40.0
$30.0
$20.0
$10.0
$0.0
Operat ing Cash Flow and Net Income ($ mi l l ion)
$46.3$41"7
$27.4 fi26.2
$38.2
fi12.1$7.0
2007 2008
Operating Cash Flow
2009
I Net Income
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HHtsHHt H tHHtst t t tsqt tsqtsqt t tsrcEErqqcqt
CCME Capital Structure @t8e$?asi
Total Common Shares Outstanding: 34.3M
Chairrnan andInsiders
I Public Flow
* Founders may eam up to 7M Shares and 7M Sharcs if the adjusted net income in 2010 and 2011reached 83.5Mand 130.2 M. r eso ectiztelu.
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Comparison of Financials @l8idd?a$'
(For six months endedJune 30, 2010) CCME Focus Media Vision China Air Media
Revenue ($ million) 98.0 283.1 55.2 102.9
EBITDA ($ million) 64.5 60.1 (18.e) (14.3)
Net Income ($ million)
Net Income Margin
Diluted EPS ($)
46.7
1,.07
24.4
0.16
(104.8)
-190%
(1.28)
(11..2)
(0.17)
P/E (1H',10) 6.3x n/a n/a n/a
Sour.e: Matket Wdtch
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@rst$auAgenda
) Background of CCME - Chairman and CEO
.} Sales and Marketing - CMO
F Network Coverage and Technology - COO
P Financial Highlights - CFO
) CVtf Corporate Strategy - Chairman and CEO
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CME Corporate Strategy
BrandingStrategy
BusinessStrategy
ResourceSfrategy
@8eg?as€
To focus our resources and energy on building thebrand of China MediaExpress, and make ChinaMediaExpress the major brand name in the out-of-home media sector in China
To use express buses as our foundation to establish amore complete media chain business model. Toenhance China MediaExpress' value through verticaland horizontal approaches, and build CME into asales kind of media
To fully explore and utilize the media resources,policy and partners resources in sales, technologyand media plafform to improve corporation's overallstrength
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