Investing in the Mainstream Media in China Has Never Been So Easy
Apr 23rd, 2008 | By Jonas Elmerraji | Category: International, Investing Strategies“A year ago, there were 15 billionaires in China. Now, there are more than 100,” said the New York Times in a piece about the growth of China’s incredible growth. But that number is more than a statistic — it’s a glimpse at the fact that the Chinese population is getting richer as a whole.
China’s new money goes well beyond the ultra-rich. The country is also home to a fast growing middle class that’s out there to consume. And that middle class is potentially more valuable to investors here in the U.S. than all of those billionaires put together.
Since last April, China’s biggest 25 companies are up 33%, versus an S&P that’s seen an 11% decline over the same period. That’s saying something…
There’s no question about it — Chinese stocks are hot right now, but some are definitely hotter than others. With a recession nipping at our heels here at home, is it even possible to find an undervalued, bubble-proof Chinese stock these days?
A Chinese Growth Story Worth Looking At
As hard to fill as that order may seem, at least one company is looking pretty salacious for the American investment dollar right now: Xinhua Finance Media Limited (XFML: NASDAQ).
Xinhua Finance Media is — you guessed it — a media company that creates and broadcasts finance and entertainment content to millions of Chinese people. But here’s the kicker — the company targets high net worth individuals in China…
We’re talking professionals who can give advertisers the most bang for their buck (or yuan, as the case may be).
XFML is an interesting story because it takes middle class Chinese consumers on from all sides… They’re in print, TV broadcasts, online ads, and mobile devices that reach more than half a billion people.
And management’s no slouch either. Their CEO was chosen as one of the Wall Street Journal’s Top 50 Women in 2004.
Even though the company has only been listed here in the U.S. for the past year, they’ve already posted some impressive numbers. They’ve got positive earnings, a double-digit profit margin, and some impressive net assets on the books. How impressive? More than $6 per share!
What’s not to like? Well, one small blip on the radar is the fact that so much of their assets are made up of intangibles. Can their figures hold up to scrutiny in a bad market?
Still, with a low P/E and a share price hovering around $3 and change, there’s a lot to like about this stock. Even a conservative analysis puts XFML above the $5 mark in the next couple years.
Recession Proof? You Bet.
Another thing that makes Xinhua Finance Media unique is the fact that they’re selling financial news, a service that gets even more eyes on it when the economy is in a slump.
Institutional investors agree… California-based investment firm Yucaipa recently took a 12% stake XFML. “The investment will strengthen our financial position and enable us to better capitalize on the opportunities in China for growth and expansion,” Xinhua CEO Fredy Bush said in a press release.
China’s already proving itself to be a workhorse market this year, and Xinhua Finance Media looks like one of the cheapest Chinese plays out there. We won’t be tracking it here, but if you’re looking to add an interesting penny play to your portfolio, this one might be worth taking a look at.
Cheers,
Jonas Elmerraji
April 23, 2008
P.S.: Penny Sleuth contributors Greg Guenthner and Jim Nelson just found a company that should do even better in the Chinese market. It’s in the one industry that Wall Street hasn’t been able to touch. But when it becomes available to the suits in New York, you can bet that early investors will make a fortune.
