Robert Hsu, editor of China Strategy, finds a company he thinks will profit from China’s booming advertising market.

Headquartered in Shenzhen, VisionChina Media (Nasdaq: VISN) is the largest company in China that uses live television broadcasts to deliver content and advertising on mass transportation systems.

Founded in April 2005, the company has since installed nearly 130,000 mobile digital displays on buses, subway trains and subway platforms in 27 major cities—including Beijing, Shanghai, Shenzhen, Guangzhou, and Zhengzhou.

The company's extensive network can reach nearly 95 million Chinese consumers on a daily basis. In total, VISN has a 50.7% market share in China, [which] has the largest advertising market in Asia outside of Japan and is one of the fastest-growing advertising markets in the world.

The company's client list has continued to increase throughout the downturn because clients see the benefit of well-targeted and cost-efficient advertising that is near their actual stores. And because it is the largest company of its kind in China, the company can and does demand premium pricing.

Since VisionChina is the exclusive provider of live television content for many of China's busiest public transit lines, competition is limited. In fact, the company [recently] announced the acquisition of its main competitor, Shanghai-based Digital Media Group, for $160 million in cash and stocks.

While VisionChina is strong in Beijing, Digital Media is dominant in Shanghai and operates digital media in nine Chinese cities' subway systems. As a result, the combined company will dominate video advertising on public transportation systems throughout China.

Overall, I think this is a terrific deal, since the acquisition creates a virtual monopoly on public transportation video advertising in the world's largest consumer market. I expect to see favorable results from the takeover show up on the company's earnings as soon as next year.

And I think that VisionChina could expand into airplanes, airports, and other places with affluent captive audience traffic. Each of these growth areas could add significantly to VISN's future bottom line.

The company's business is already faring quite well—VISN earned 100% revenue growth on an annual basis in 2009. While the earnings growth slowed a bit this year, I believe it is due to its fast network development and investment costs. Considering its dominant role in the market, VISN will see high-flying earnings very soon as it starts to collect revenue from current investments.

Two years ago, VISN shares traded as high as $25, but share prices collapsed [in] the global financial crisis. Share prices have been in a steady up trend in the past two months, but the stock is still 65% below its peak in 2008. And its current price/earnings ratio is around 13.5x.

But as a media company with such a monopoly position, I believe it deserves a higher P/E. So, I believe that shares will head even higher going forward. I want you to buy VISN under $11. (It closed around $9 Tuesday.) I'm targeting $15 within about six to eight months.

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