Tuesday, July 16, 2013

Remember Ivax? Know Opko? Billionaire Dr Frost Now LOVES a China Small-Cap (My Meeting w/ Tiger Media Mgmt)

US billionaire Dr. Phillip Frost has an exceptional track record.

He’s currently Chairman and CEO of $2.5 billion Opko Health (ticker: OPK) -- up 50% in 2013

What’s next for Dr. Frost?


Over the last couple of years Dr. Frost has been quietly building a substantial position in NYSE-listed China small-cap Tiger Media (ticker: IDI). According to an SEC filing on July 12th, Frost now owns 31.5% of Tiger’s outstanding stock – including a 300,000 share open market purchase on July 10th.

After meeting with management last week in Shanghai, I now see what Dr. Frost finds so compelling.


Tiger Media, formerly SearchMedia is a Shanghai-based outdoor media company --- billboards and LCD screens as advertising platforms --- a big business in China.

From Tiger’s latest 10-K:
“We are a multi-platform media company operating primarily in the out-of-home advertising industry. Out-of-home advertising typically refers to advertising media in public places, such as billboards, screen displays and street furniture. Our outdoor billboards, which are mostly built on rooftops and with good visibility from long distances, complement our network of LCD screen displays which are built on the street level that captivates eye-level awareness. We are also developing an integrated marketing platform to deliver online to offline (“O to O”) solutions in addition to traditional media agency services, utilizing our furniture displays at designated consumer direct-reach locations. We believe we are able to provide multi-platform, “one-stop shop” services for our local, national and international clients.“

The out-of-home advertising industry in China is booming. The most prominent player is hedge-fund favorite Focus Media (ticker: FMCN), which was recently taken private by Carlyle and Fosun at a $3.7 billion valuation. Rumors suggest Focus management was simply fed up with the discount applied to Chinese companies traded on the US market and will soon re-list in Hong Kong at an even higher valuation.

Aside from Focus Media, there are private players like Tulip Media and other public players like AirMedia (ticker: AMCN). None are exactly alike. But they’re all trying to get a piece of the fast growing yet fragmented out-of-home market that shows no sign of slowing down.

According to a June 2013 McKinsey report (see chart): 
“China already is the world’s third-largest advertising market, and it is poised nearly to double, reaching more than $70 billion by 2016.... Digital advertising is on the upswing in China, but billboards and posters will retain their popularity.”
This is all good news for companies like Tiger Media (ticker: IDI).


Tiger Media was founded in 2005, made a series of acquisitions, and then listed on the NYSE through a SPAC in 2009.

In 2010-11, under the leadership of former Oppenheimer & Co media banker Paul Conway the company focused on addressing legacy issues left by previous management. Conway then began to focus on building a new foundation for growth.

In early 2012, Tiger hired a new CEO. Peter Tan was previously a corporate lawyer and private equity fund manager. Before Tiger, CEO Tan invested in 40+ Chinese companies. He was also an early investor, board member or observer in various companies including out-of-home player AirMedia (ticker: AMCN) and highly successful economy-hotel-chain Home Inns (ticker: HMIN).

In 2012-13, CEO Tan continued to clean up legacy issues, divested low-margin businesses, terminated Tiger’s VIE structure, assisted the SEC in closing its investigation, and focused on building a new strategy for the company.

That strategy, according to a late 2012 roadshow presentation involves 2 key elements: (a) LCD ad platforms at luxury shopping malls throughout China, and (b) billboards at economy-hotel chain Home Inns (ticker: HMIN) which already has a presence in hundreds of Chinese cities.

There’s also a hint in the latest 10-K of a 3rd element to Tiger’s strategy:
We are also developing an integrated marketing platform to deliver online to offline (“O to O”)”.
This strategy would seemingly target the hundreds of millions of mobile phone users in China – more and more of whom are smartphone users.


Based on its current share price, it’s easy to dismiss Tiger Media as yet another questionable Chinese small-cap. It’s had a slew of problems over the years including significant accounting issues at companies it acquired.

But consider the following:

The last three years of company press releases show clear incremental progress toward a successful turnaround. 

Management has:
Next, consider the following about China’s out-of-home industry:

  • Successful businesses like Tiger-comp Focus Media are high-margin, highly scalable, and enjoy high rates of contract renewal;
  • The industry is highly fragmented with ample opportunity to both grow organically and through acquisition;
  • McKinsey expects the China advertising industry to double by 2016 -- and predicts out-of-home will maintain its current market share.
  • The industry should continue to benefit from the increasingly urban, affluent Chinese consumer MNCs and domestic companies want to get in front of.
Finally, consider the Dr. Frost factor:

U.S. billionaire Dr. Frost is a savvy serial entrepreneur and investor. He’s had numerous massive exits and is currently working on frequently acquisitive $2B+ Opko Health (ticker: OPK) as Chairman and CEO.

As we saw from Friday’s SEC filing, Frost continues to purchase Tiger stock. With 31.5% ownership it’s fair to assume that he’s invested for the long-term.

Frost and his team at Florida-based Frost Group are not only invested in Tiger’s stock but are also actively involved in advising Tiger’s CEO. Notice too that Tiger’s General Counsel is Joshua Weingard who also currently serves as Chief Legal Officer for three other public companies with affiliations to The Frost Group.

Naysayers might say this is a small investment for Frost. But the time spent and resources he’s providing tell you he’s invested in making this a huge success.


Clearly, Tiger Media is a speculative play. The market believes its days are numbered. But if its days were in fact numbered, US billionaire Philip Frost would likely not be wasting his time buying stock.

Of course, as with every business Tiger must execute. They’re faced with a very competitive market and large, established players.

But I came away from a meeting with Tiger CEO Peter Tan in Shanghai last week with ever more conviction that Tiger’s best days are ahead.

They have a solid management team with significant experience in the out-of-home space, a Board of Directors comprised of both Westerners and Chinese, a high margin and highly scalable business model, a fast-growing ad market, favorable consumer and urbanization trends, good government relations, the blessing of Home Inns (ticker: HMIN), significant institutional ownership, and a stellar backer and frequent advisor in billionaire Dr. Frost. Equally as important, the SEC has given them a clean bill of health.

Finally, Tiger Media CEO Peter Tan has a substantial incentive to execute. He owns millions of shares both personally and through his investment vehicle. And for those concerned about a protracted China slowdown, he’s not worried. With Tiger’s stock trading near $1 there’s little downside risk.

I look forward to your comments below. 

You can also reach me at ezra(dot)marbach(at)gmail(dot)com

Disclosure: Long IDI


Peter A Delgado II said...

An excellent piece Ezra! Keep up the great work - Tiger Media is sure to be an explosive winner!

Anonymous said...

is it inaccurate to say this company is being valued pro-forma end of year build-out at $350k per television screen owned? That seems like a ridiculous multiple for an LCD screen no bigger than the average home TV.