Sinomedia Holding Limited (SEHK:623) Price 4.30 (52 wk high: 4.73, 52 wk low: 2.70) Long Term Debt 0 Last 12 months EPS $0.09 Last 12 months Rev $263.4m Sinomedia is a media advertising operator based in China, focusing on nationwide T.V. advertising coverage predominantly for CCTV (China Central Television). CCTV is a state channel with a viewer reach of over one billion and is the only channel authorised to broadcast statewide. Ratings are around 33%, increasing during sporting events such as the 2012 Olympics and during the New Year galas. CCTVâs advertising rights are sold via auction before each year begins; Sinomedia along with several other companies bid for these rights. Sinomedia has successfully and consistently won more rights each year since inception (2013: 11.4% of total allotment, +27% YOY); it then resells these to advertising agencies or uses them for clients, 500 Government and 1600 Private. During 2012 growth in China started to slow, resulting in a GDP of 7.7%. Sinomedia aware of this spent 2012 cost cutting, disposing of inefficient T.V. ads, increasing clients, focusing on prime time advertisement slots and bringing forward their yearly trade shows. All of these helped boost margins in the second half of the year from 22.8% to 43.6% (expected 36.7%) and produced a yearly increase in net profits of 27%. They have actively been using their $231m in cash for M&A deals, staying focused on advertising but moving into the growing travel advertising arena (15.1% YOY) and growing mobile market arena (Phone sales grew year on year by 4.3%, of those sales 49% were smartphones). This is being done with sites such as Lotour (http://www.lotour.com/) and with investments such as FoneNet Inc. (â100TVâ) & (âZhongtoushixunâ). Financials: Trading at a P/E ratio of 6.3, in a historic range of 5-13 and with a sector ratio of 14.1, I feel this is an exciting value play. Their cash holding of 231.5m (Equity 197.4m) with zero debt provides a nice safety net. Management are actively buying back shares, 3m (0.5%) in 2012, 7m (1.26%) in 2011, all the while they are retaining earnings and providing an increasing dividend which is currently a yield of 6.38%. Year 2008 2009 2010 2011 2012 Net Icome($m) 17.7 13.0 25.2 38.4 49.0 EBITDA($m) 22.1 18.3 32.5 57 68.5 Cash($m) 84.2 47.3 120.7 144.9 231.5 ROE 22.7% 12.5% 20.8% 25.8% 27.1% Risk: Loss of market share for CCTV and slowing growth in China. Catalysts: Increasing Margins, beating expectations year end and improvements in the advertising industry.