Thursday, February 20, 2014

Tiger Media: The Pros Preach Patience (IDI) $IDI

Tiger Media (ticker: IDI) investors are impatient. 

The Chinese out-of-home advertising platform company hasn’t said anything publicly since late December 2013 and the stock is at a 6-month low.

And while an earnings release is no doubt imminent investors can’t seem to wait.

But there’s reason for optimism.

In December (only 2 short months ago), Tiger’s largest shareholder gave an interview after visiting Tiger headquarters in Shanghai.

In that interview, US billionaire Dr. Frost communicated many things.

1. Patience:
“I can tell you right now like other businesses that people invest in, you don’t always have a straight road up, so far as results are concerned.”
2. Support for the CEO, his team, and the strategy:
“The initial team that was put together in China was dismissed. And we have a new CEO in place, Peter Tan, who is a terrific guy.

I just came back from Shanghai a few days ago and met with the people in their offices. It’s functioning beautifully now.” 
3. Near-term profitability:
“We expect the company to be profitable early next year.”
4. Excellent business model:
“The installation of their advertising screens are amazing. They’re very classy and very elegant.

It’s a terrific business model now with good management.”
5. High expectations for growth:
“The new name for that is Tiger Media.That is a company that as often happens, struggled initially, but we think we have a good formula now. We expect it to grow rapidly.”
6. He’s well aware of what’s going on:
“I’m an investor there. I’m not managing that business but since I have a significant position I try to keep abreast of what’s happening.”
Frost followed those bullish comments later in December by exercising his outstanding warrants. A filing with the SEC on February 14th 2014 showed he now owns 29.3% of the company.

The Tiger press release announcing Frost’s decision to exercise his warrants communicated some important things too:
“Peter W.H. Tan, Tiger Media’s Chief Executive Officer remarked, “Through December 19, 2013, approximately 2.2 million warrants have been exercised at $1.25 per share, representing proceeds of approximately $2.7 million, including 1.7 million warrants in the aggregate from insiders, including an affiliated entity of Dr. Phillip Frost, the Company’s largest beneficial owner, and Robert Fried, the Chairman of the Board.

We thank Dr. Frost and Mr. Fried for their continued belief in the turn-around of Tiger Media and intend to use any proceeds of the warrant exercise to expand and develop our Luxury Mall LCD network in Shanghai and other cities in China.”
So Frost is clearly supportive and bullish –- but patient.

CEO Tan’s recent activities should also give investors comfort.

Not only did he recently receive options but he was also rewarded significant stock units by Tiger’s board of directors (which he later acquired):
"On November 11, 2013, Mr. Tan received a grant of 350,000 RSUs of the Company. This grant of RSUs fully vested on January 2, 2014. Mr. Tan acquired the securities for investment purposes."
This tells you the board is pleased with Tan’s performance –- as Dr. Frost already told us in the interview above.

And while there’s been some institutional selling the overall volume in the stock has been minimal. This signals that the big holders remain patient for the new strategic plan to play out.


Tiger has undergone a challenging turnaround and implementation of its new strategic plan is underway.

But investors must be patient –- as is Dr. Frost, Tiger’s largest shareholder.

Only 2 short months ago Frost told us exactly what he thought and followed that up by exercising his warrants and rewarding the CEO for what he and the board perceived as a strong performance.

We’ll no doubt hear from the company in the next month with the release of Q4 earnings results. We should also expect news of the hiring of a new CFO – though CEO Tan is perfectly suited to handle CFO duties in the interim thanks to his background in finance.

Ultimately, if you want exposure to the many secular trends sweeping China this is one of the few ways to do so.

But patience is critical –- as billionaire Dr. Frost told us –- until soon the story plays out and these low prices are long gone.

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