We predict its Q1 2009 EPS to be Rmb0.08-Rmb0.09, with year-on-year increase of around 60%.
Influenced by spring festival holidays and the budgeting, seasonality of Chinese advertisement industry is rather obvious, with quarter one being the off season, quarter two and quarter three being even, and quarter four being the hot season.
With advertisement price in Q1 2009 still being buoyant for the company, publishing rate in single-decker buses is beyond our expectation, yet that of double-decker buses is not so optimistic.
The company has the lowest valuation, yet its development is the most potential among its peers. Its 2008-2009 P/E ratio is at 30x and 20x, which is far below the sector average of 40x and 30x. Given relative valuation and that of the absolute valuation analysis, we consider Rmb16-Rmb18 is reasonable valuation range for the company, and “Recommended” rating is hereby maintained.
Potential risks: Negative impact of financial crisis to bus advertisement price and publishing rate is beyond our expectation; Outdoor advertisement inspection policy risks in Beijing may adversely affect the company.