Growth from Opposite Sides of the Globe
03/19/2007 12:00 am EST
Ian Wyatt, editor and publisher of the Growth Report, likes a Chinese advertising company and a Texas-based energy service firm.
Ticker Symbols FMCN, TGE
Focus Media (NASDAQ: FMCN), a leading display advertising and media company in China, announced impressive financial results for the fourth quarter and full year ended December 31, 2006.
For the full year 2006, revenues totaled $213.3 million, an increase of 212.6% from 2005. Net income in 2006 was $83.2 million or $1.60 per fully diluted ADS, up 253.3% from 2005.
For 2007, Focus Media expects net income (excluding stock compensation and amortization of acquired assets) to be around $2.83 to $2.90 per fully diluted ADS. Analysts expect the company to earn $2.74 per share on revenues of $350.4 million. [For] 2008, consensus estimates call for EPS of $3.69.
Shares of Focus Media currently trade at 26x 2007 EPS estimates, and 20x 2008 EPS estimates. Focus Media has positioned itself very well in the fast growing Chinese advertising sector and continues to exceed expectations. We are upgrading Focus Media to a Buy with a price target of $90.00, which approximates to 25x forward year estimates. (The ADS closed Friday at $72.50-Editor.)
TGC Industries (AMEX: TGE), a leading oil and gas geophysical services firm, saw revenues increase 120% for the full year 2006. Net income was $0.51 per fully diluted share versus $0.45 per fully diluted share in 2005.
President and CEO Wayne Whitener commented that "inclement weather during the second half of December...has continued into the first quarter of 2007 and will adversely affect our results. Looking ahead, however, we remain optimistic for the remainder of 2007."
The stock currently trades at a low P/E of 13X the 2007 EPS estimate of $0.60. We reiterate our Buy rating but are lowering our price target from $15.00 to $12.00, which represents 20x the current year estimate.