China Mediaexpress Holdin (PINK:CCME)

FUJIAN, China--(BUSINESS WIRE)--China MediaExpress Holdings, Inc. (NASDAQ GS: CCME)  today denied the misleading and inaccurate allegations made in a recent report published by Muddy Waters. The Company announced that it would, as soon as possible, issue a public statement to refute these defamatory remarks and that it expected to be in a position to provide a thorough and detailed response within the next few days, notwithstanding Muddy Water’s apparently strategic decision to release its “report” at the outset of the Chinese New Year.

In a separate but related note, CME today also announced its December 2010 contract with Eading Group (http://www.eading.com/web/eadingcompany/rongyu/), one of Apple Inc.’s official distributors in China to advertise Apple products, specifically iPads, in CME’s SWITOW magazine, a new B2C shopping platform for its contracted advertisers.

Dec. 28, 2010 (Business Wire from this morning) -- China MediaExpress Holdings, Inc. (NASDAQ GS: CCME) today announced that CME formally launches SWITOW, a new B2C shopping platform for its contracted advertisers.

The SWITOW shopping platform includes: a) the SWITOW magazine that will be distributed in CME’s network, b) the SWITOW website (www.switow.com) and c) boutiques to be opened in certain major cities. Through the SWITOW platform, our advertisers will be able to promote a wide range of their products including popular consumer items such as electronic appliances, computers, mobile phones, apparel, fragrances and cosmetics, and household items. Customers may place orders by either calling the SWITOW hotline, or via the SWITOW website.

The contracted advertisers will provide the “lowest price guarantee” for all the items sold on the SWITOW platform. Moreover, some items sold through SWITOW will offer a longer warranty period than the traditional sales platform. CME has already signed contracts with many prestigious global and Chinese domestic companies or their distributors such as Apple, Sony, Toshiba, Adidas, Nike, Samsung, Phillips, Skyworth, Supor and others, to feature their most popular products on SWITOW and we expect others to join the platform. CME has hosted the SWITOW launching ceremony today in Fuzhou, where the press and representatives from China Enterprise Directors Association, HuaXia Bank and the contracted advertisers attended.

SWITOW orders will directly pass to the contracted advertisers who are solely responsible for order fulfillment and bear all inventory risks, as well as all post-sale obligations. A percentage of the sale of the listed items will be earned by SWITOW. SWITOW will reward the contracted advertisers by broadcasting the advertisements of the contracted advertisers on CME’s media network. CME’s expenses consist primarily of the cost of printing and distributing the shopping magazine, website management, and staffing and equipping the hotline center. CME will also pay a moderate monthly fee to bus operators, airports and other locations for the exclusive right to distribute the magazine.

Founder & CEO, Zheng Cheng, added, “This project further enhances the value and growth potential of CME’s platform. We believe this business model can make use of the strength of our passenger flows and will be successful as it helps contracted advertisers target sales through a new retailing channel. As media demand for CME’s network increases, we expect that this driver will accelerate the growing momentum of the advertising platform in CME. It also enhances value to advertisers, as advertisers not only spend their money on CME’s platform but they can also earn money from CME’s platform. Passengers will be able to enjoy lower prices for products sold through SWITOW. This platform should be a win-win-win situation for CME, the contracted advertisers, and passengers.”

CME’s Chief Financial Officer, Jacky Lam, commented, “As previously announced, this project has been in the works for several months. With the launch of the SWITOW platform, we are expanding our revenue sources by offering customer-direct sales to our advertising clients at a relatively low cost and our clients are able to optimize their advertising expenditures by using our media platform. We expect the incremental revenue and profits from this extension of our core business to be reflected in our 2011 financial results.”

CCME take another step to maximize shareholder value:

AN, China--(BUSINESS WIRE)--China MediaExpress Holdings, Inc. today announced that its Board of Directors has approved the implementation of a dividend policy on its common and preferred shares. Pursuant to the policy adopted by the Board, commencing with the six month period ending December 31, 2010, a semi-annual cash dividend of 5% to 10% of CME’s net profit will be paid upon receipt of the related financial statements by the Board. The Company’s Board of Directors will decide the exact payable amount at the corresponding board meetings in light of CME’s cash flows, expected liquidity needs and future corporate strategies.

CME’s Founder & CEO, Zheng Cheng, commented, “Consistent with our commitment to continuously maximize value to our investors, our Board of Directors agreed that with the Company’s exceptional balance sheet and solid free cash flow generation, it is time to recognize the ongoing support of our shareholders. With this payout ratio, we will continue to have the financial flexibility to invest in our high-return, high-growth projects.”

Third Quarter 2010 vs. Third Quarter 2009

• Revenue increased by 118% to $57.0 million as compared to $26.1 million;
• Gross margin was 76.8% as compared to 67.0%. 
• Income from operations increased by 166% to $41.2 million as compared to $15.5 million.
• Net income increased by 167% to $31.1 million or $0.81 per diluted share as compared to $11.7 million or $0.56 per diluted share.
• As of September 30, 2010, the Company had approximately $170 million in cash.

Zheng Cheng, CME’s Founder and CEO, commented, “As expected, revenue and net income maintained very strong growth in the third quarter. The growth was primarily attributed to the power from our largest inter-city buses network in China where our advertising time sold, average advertising rates, number of our advertising customers, and a greater proportion of direct sales to agency sales increased substantially compared to last year.

“In addition, embedded advertising continued to generate a significant portion of our revenue as we have packaged and sold it separately to our clients since Q3 2009. The embedded advertising, which is displayed during the broadcasting of the content, has relatively low production cost, generates high margins and accounts for approximately 23% of our revenue for the nine months ended September 30, 2010.

“Furthermore, our year-to-date results reflect the success of our airport express bus business. Since the first launch of this new business line at the beginning of 2010, the advertising packages sold for airport express buses have been at premium prices, because of the demographics of airport express bus travelers, exclusivity for all the buses from the airports and the unique captive environment. As a result, the expansion of this business has generated significant revenue and has produced higher gross margins overall. For the nine months ended September 30, 2010, the revenue generated from airport express buses was approximately $35.1 million, of which approximately $15.0 million was generated in the third quarter. Our network today covers six large and important airports in China: Beijing, Fuzhou, Guangzhou, Qingdao, Changsha and Chongqing.”

Mr. Cheng continued, “We continue to grow our bus network through new contracts with bus operators in regions we already serve and by expanding into new regions in this highly fragmented niche market. Since the start of this year, we have grown our network by more than 4,000 express buses and have expanded into five new regions: Zhejiang, Hunan, Jianxi, Henan and Inner Mongolia. We have long-term contracts in place, ranging from three to eight years with 63 bus operators.”

Jacky Lam, CME’s Chief Financial Officer stated, “As of September 30, 2010, we had approximately $170 million in cash up from $139 million as of June 30, 2010. Cash generated from operating activities for the first nine months of 2010 was $69.0 million (of which $30.8 million was generated in the third quarter), compared to $29.9 million generated in the same period of 2009. Net cash used in investing activities during the current nine month period was $3.6 million. Our cash resources continue to be sufficient to meet both our short-term and long-term liquidity needs, capital expenditure requirements to achieve our expansion plans, including internal growth initiatives as well as potential acquisitions.”

Increase 2010 Net Income Guidance

Based on year-to-to-date results and expectations for the fourth quarter, the Company is increasing its 2010 net income guidance which is expected to be in the range of $100 million to $104 million compared to the previous net income guidance of $82 million to $85 million (on a non-GAAP basis, exclusive of non-cash charges for (i) share based compensation in connection with the granting of options under the Company’s share incentive plan expected to be adopted later in 2010 and (ii) deemed dividends on outstanding convertible preferred shares).

Mr. Cheng concluded, “As we have mentioned in the past, we are working on several additional opportunities to increase our market share and reinforce our position as one of the leading players in the out-of-home advertising space. Furthermore, mergers and acquisition remain a corporate priority. We are very proud of our achievements and look forward to continued growth during the years ahead.”

Second Quarter 2010 vs. Second Quarter 2009 :

• Revenue increased by 180% to $53.5 million as compared to $19.1 million.
• Gross margin for the current second quarter was 79% as compared to 62%.
• Income from operations increased by 245% to $38.3 million as compared to $11.1 million. 
• Net income increased by 244% to $28.5 million or $0.80 per diluted share as compared to $8.3 million or $0.40 per diluted share.

First Half 2010 vs. First Half 2009

• Revenue increased by 159% to $98.0 million as compared to $37.9 million.
• Gross margin for the current first half period was 70% as compared to 62%.
• Income from operations increased by 189% to $62.5 million as compared to $21.6 million.
• Net income increased by 196% to $46.6 million or $1.07 per diluted share as compared to $15.7 million or $0.75 per diluted share.
• As of June 30, 2010, the Company had more than $139 million in cash.

Zheng Cheng, CME’s Founder and CEO, commented, “We are very pleased with the record first half results and continuous growth of our business. Our revenue and net income for the first half of 2010 grew by 159% and 196% respectively when compared to the same period of 2009, but more importantly has already surpassed revenue and net income reported for 2009 as a whole. The increase was attributable to several factors including:

• total amount of advertising time sold.
• higher average CPM rates.
• expansion of our advertising base and geographic coverage.

Furthermore, since the third quarter of last year we started to generate additional revenue from the embedded advertisement displayed during the broadcast of the entertainment content and in addition to the revenues generated by the airport express buses, a business which we entered in early 2010. In the beginning of the year, we made the important decision to implement premium advertising rates for airport express buses compared to inter-city bus advertising rates. As a result of these premium advertising rates, we were able to generate $20.1 million of additional revenue for the first half of 2010 (out of which $7 million were generated in the first quarter), as compared to the same period of 2009, when this business was non-existing. Our network today covers the airports of Beijing, Fuzhou, Guangzhou and Qingdao.”

The Company reaffirms its recently revised 2010 net income guidance which is expected to be in the range of $82 million to $85 million (on a non-GAAP basis, exclusive of non-cash charges for (i) share based compensation in connection with the granting of options under the Company’s share incentive plan expected to be adopted later in 2010 and (ii) deemed dividends on outstanding convertible preferred shares). Again, these projections exclude the impact of any possible acquisitions, additional of new buses and new investments in other media projects in 2010.

Mr. Cheng concluded, “We are very proud of our achievements. We have a dedicated management team which continues to work diligently to take advantage of several opportunities to increase our market share and further strengthen our position as China’s largest television advertising operator on inter-city and airport express buses. China's quick economic recovery in 2009, the rapid growth of advertising spending in China (which increased by 13.5% to $74 billion in 2009), and the better-than-expected outdoor advertising market trends, have paved the way for the ads market to reach new heights in 2010.”

As of the end of the second quarter CCME had:

• Zero long-term or short-term  debt
• Current ratio of 6 to 1
• $139.3  cash balance
• Annualized operating cash flow run rate of $76.4 million

China’s largest television advertising operator on inter-city and airport express buses, today announced that based on the latest developments, including the expanded geographic coverage, increased number of inter-city buses, and higher margins from the airport express buses platform, it is revising its 2010 net income guidance.

The revised guidance calls for 2010 net income to be in the range of $82 million to $85 million (on a non-GAAP basis, exclusive of non-cash charges for (i) share based compensation in connection with grants under the Company’s share incentive plan expected to be adopted later in 2010 and (ii) deemed dividends on outstanding convertible preferred shares), compared to the initial 2010 net income guidance of $71 million to $75 million.

Jacky Lam, CME’s Chief Financial Officer stated, “Our revised 2010 net income guidance reflects the continued growth of our business from existing revenue sources, and excludes the impact of any possible acquisitions, additional new buses, new revenue streams and any new investments in other media projects in 2010.

“We expect to continue to benefit from China’s rapid increase in advertising spending - which is projected to remain one of the fastest growing advertising markets in the world - sustained economic growth, and increases in disposable income and domestic consumption. We plan to continue to grow our business organically and we are also actively looking for acquisition opportunities within our core business platform. Furthermore, we are working hard to finalize several new projects which we believe will further enhance CME’s shareholder value. We have sufficient resources to fund our business expansion plans, including internal growth initiatives as well as potential acquisitions.”

Based on the current customer base, geographic coverage, network of express buses and existing revenue streams, CME’s management reaffirms its 2010 net income guidance which is expected to be in the range of $71 million to $75 million (on a non-GAAP basis, exclusive of share based compensation in connection with the share incentive plan which is expected to be adopted and with options to be granted in the 2nd or 3rd quarter of 2010 or deemed dividend on issuance of convertible preferred shares). As previously announced, these projections exclude the impact of any possible acquisitions, additional of new buses and new investments in other media projects in 2010.” Mr. Cheng concluded,

“Looking ahead, as advertisers are accelerating their efforts to grow their sales beyond the first- and second-tier cities into less developed markets, we believe that we have positioned our Company to benefit from the rapid growth of advertising spending in China. We are very proud of our success which is a result of the dedication and hard work of our management team and all of our employees, and we are confident that our Company has a bright future.”

Excerpt from form NT 10-Q (extension to file 10Q):

We anticipate a significant change in our results of operations from the corresponding period in the last fiscal year due to our former status as a shell company. Based on currently available information, we anticipate reporting net income of approximately $18 million for the quarter ended March 31, 2010, before making any adjustments for the accounting of the preferred shares that we previously issued for the quarter ended March 31, 2010.

Based on the current customer base, geographic coverage, network of express buses and existing revenue streams, CME’s management projects that its 2010 net income (non-GAAP which is before share based compensation or fair value adjustments for the Company’s financial instruments), will be in the range of $71 million to $75 million. These projections exclude the impact of any possible acquisitions, additional of new buses and new investments in other media projects in 2010.” Mr. Cheng concluded, “We believe that our Company is well positioned to further benefit from the rapid growth in the advertising spending in China, the second largest advertising market in Asia, and one of the largest and fastest growing markets in the world. We are very proud of our success and are confident that our Company has a bright future.”

Source: Business Wire (March 23, 20 10)