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.
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.
Conclusion
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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