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Vision China posts strong first quarter results

Author: Bill Gerba on 2008-04-26 10:58:12

From their press release:
  • VisionChina Media's total revenues were $13.6 million in the first quarter of 2008, an increase of 304.5% compared to $3.4 million in the first quarter of 2007 and an increase of 13.5% compared to $12.0 million in the fourth quarter of 2007.
  • Advertising service revenues were $13.2 million in the first quarter of 2008, an increase of 326.0% compared to $3.11 million in the first quarter of 2007 and an increase of 13.2% compared to $11.7 million in the fourth quarter of 2007. Total broadcasting hours reached 25,980 in the first quarter of 2008 compared to 23,908 in the fourth quarter of 2007. Average advertising revenues per broadcasting hour were $493 in the first quarter of 2008 compared to $474 in the fourth quarter of 2007. On average, the Company sold 6.24 advertising minutes per broadcasting hour in the first quarter of 2008 compared to 8.69 advertising minutes per broadcasting hour in the fourth quarter of 2007. Up to March 31, 2008, more than 380 advertisers had purchased advertising time on the Company's network either directly or through an advertising agent.
  • Media cost, the most significant component of advertising service cost of revenues, was $4.7 million in the first quarter of 2008, representing 77.3% of total advertising service costs, compared to $3.2 million or 77.6% of total advertising service costs in the fourth quarter of 2007.
  • Gross profit in the first quarter of 2008 was $7.2 million, a decrease of 4.9% from $7.6 million in the fourth quarter of 2007, and an increase of 1145.7% from a $0.60 million in the first quarter of 2007. The decrease of gross profit in the first quarter 2008 from the fourth quarter 2007 was primarily due to the increased media costs associated with the three new exclusive cities that were included in the Company's network: Taiyuan, Chengdu and Ningbo. Advertising service gross margin was 54.3% in the first quarter of 2008, compared to 64.8% in the fourth quarter of 2007. The advertising equipment gross margin in the fourth quarter of 2007 was 15.4%, compared to 17.3% in the first quarter of 2008. Excluding the three new exclusive cities, the average advertising services revenues were $543 per broadcasting hour.
Our take:

WireSpring is generally bullish on the prospects of digital out-of-home advertising in China, due to their extremely large population which continues to gain wealth and purchasing power despite economic slowdown in the west.  Further, low labor costs and the opportunity to study Western businesses and infrastructure providers (and learn from their mistakes) continue to give the Chinese key cost advantages which are handily utilized in their enormous digital signage deployments.

There is one potential caveat for the entire market, though. China's government, while slowly warming to the idea of free market capitalism, remains a Communist entity, and as such has the potential to invoke stringent new laws against consumerism and advertising (or enforce the ones the currently have on record).  While such a prospect remains unlikely for the time being, it cannot be discounted entirely.


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