Tuesday, April 1, 2014

Key Quotes from Tiger Media’s Q4 2013 Earnings Call & A Comment (IDI)

Yesterday, Tiger Media (ticker: IDI) reported Q4 2013 earnings results. Their earnings call provided a variety of updates. Here are some key quotes from CEO Peter Tan (and a concluding comment):

"In late June 2013 we launched our iScreen LCD business at prominent points of high-end shopping malls at commercial centers in Shanghai

We now have over 100 screens at over 20 commercial compounds in Shanghai

We've also installed WiFi at many of the iScreen locations to provide a wider consumer reach and we're beginning to see ad clients warming up to interactive media solutions and ideas.

I do feel that this is the future direction outdoor media companies will take. "
iScreens – Underutilized Asset
"These screens are underutilized in terms of the technology and services and products we can deliver -- anything from augmented reality to WiFi to 3D. There's a lot that digital media can deliver.

At the moment, a lot of the advertisers are still using posters, digital posters, digital posters with flash features.

What we have now is a fantastic sales team but we do want to create a force to drive that part of the business to provide solutions to advertisers and more creative in terms of the way they advertise to reach the consumer.

The technology is there, the hardware ready. But we just need to package and basically put ideas in front of the advertisers."
Future Geographic Expansion
"During 2014 we hope to extend our iScreen LCD screen concession in Shanghai and other Chinese cities.

Beijing, Chongqing and Guangzhou are definitely still in the picture. We're looking at probably in the next 2 quarters."
New Business Expansion Model
"In an effort to mitigate the risk associated with early stage development and conserve the company's internal cash resources we intend to focus our expansion efforts toward working with local partners in each of the targeted cities rather than choose direct acquisition and ownership of equipment and concessions.

We have tweaked the model a little bit. We'd like to be closer to the client rather than spend a lot on capital expenditures to build these media screens all over the country.

We'd prefer to pass on that risk to another developer and work with them as partners while still controlling the sales from Shanghai.

It's a change from what we initially started out to do where we'd work with the government authorities in various localities -- owning and operating these assets on our own.

It's more of a joint-venture model and it's basically allocating more of our resources on the sales team and centralizing the sales team here in Shanghai and give up a little bit of the margin for not being 100% media owner and try to minimize our risk at the outset."
Home Inns (ticker: HMIN) Partnership
"We also hope to re-focus our efforts at Home Inns locations focusing more on the internal locations than on the rooftop billboards

I've spoken with management over there (Home Inns) and the idea for this year is to re-focus our efforts on out-of-home media indoor but basically in their lobbies, elevators, and maybe in their rooms…it was a decision to focus on the lower-hanging fruit which is the indoor portion of the Home Inns media capability."
"We will continue to be opportunistic and pursue complementary or strategic acquisitions which could provide significant opportunities to diversify and drive our growth.

If we were to find a very good acquisition we would probably need to raise new capital."
Cash Position
"The cash position at present is sufficient to help us meet internal goals"
"It is noteworthy that our last quarter was slightly profitable.

Although the amount of profit may not be as meaningful, I do hope it signifies a pivotal turnaround for this company and that we're in the stage of rebirth and fast growth.

But I still remain prudent in managing our capital expenditure in a slower paced economic growth environment in China.

I do believe we are on the right track and nimble enough to manage through any changes in advertiser preferences this year and for the years to come."
"I'm pleased to announce that we will be hiring a new senior level finance employee that we've identified as a very good candidate to act as interim CFO and she'll be on board in mid-April 2014"
High-Level Strategy Discussion
"It's our strategy not to stay as just a traditional media company but forge the application of innovative and creative technologies on our LCD screens.

They will become interactive so consumers will not only be seeing advertisements on our screens but they can interact with our advertisements online to acquire product information and consumer benefits like promotions and product discounts. Advertisers in return can get spontaneous market intelligence such as consumer preference and purchasing habits.

In 2014, I would like to extend our lead as the first digital interactive outdoor media platform for malls in Shanghai."
Near-Term Strategy
"We're very focused on driving sales, very active in hiring. We'd like to double the size of the sales team before the end of the 3rd quarter. 
It's the same strategy with any newly installed media. You have to make your mark and you have to be very aggressive in driving sales."
Capacity Utilization
"We're still running at 15%-20% capacity. It's very hard to predict what average capacity we're in because a lot of these promotions and campaigns are seasonal and sometimes you have a rush for a few weeks and you have some lag time. But by and large we're running at 15%-20% capacity. The first quarter of this year that number it was around 10% capacity

The first quarter utilization is not representative of the trend and not representative of this year. As many of you know, because of the long holiday in China in the 1st quarter for the Chinese New Year ad sales and ad placement are at a low. Ad sales are slightly lumpy in nature and seasonal. So it takes a longer period to try to figure out the trend.

I don't think that the utilization rate will remain the way it is. I don't think it's on a downward trend at all. In fact, we do see a lot of active interest from clients.

The 10% utilization is very difficult to calculate. It's not 10% across the board. With 100 locations..some locations 50%, some less. So it's not based on an overall network ratio."
Investor Relations and Communications
 "We hope to improve in that department (shareholder communication). We're actively looking for someone in-house and investor relations. We're also considering retaining professionals. Rest assured we do want to keep our investors happy."

While Tiger CEO Tan was forthcoming with a variety of updates and provided a glimpse into his strategic thinking today, some investors weren’t pleased.

They were focused almost solely on Tan’s comments about Q1 utilization rates.  Of course, as the call progressed we understood that Q1 utilization rates were far higher than the 10% he initially suggested.

But the damage was done.

It’s important to remember that Tiger is not only a turnaround but is also working to establish a new, and potentially lucrative new media format.

This obviously takes time.

But remember that this is not some random new media format.

Many Chinese public companies are focused on the same thing or something similar. 

AirMedia (ticker: AMCN), for example, another Chinese out-of-home ad platform company expects their interactive platform to “become a significant revenue stream”.

So, Tiger CEO Tan isn’t the only one pitching this new format. With many players pitching advertisers, it’s plausible adoption will be relatively quick.

I would suggest that Tiger Media is even better positioned than many of its competitors in this new format due to the proximity of its screens to the point of sale.

Finally, while the market reacted negatively today, it’s important to point out that volume was hardly substantial. Big institutional holders still hold. Some tell me they’re even buying more on today’s dip.

All in all it’s clear that there’s a lot of room for growth here. It’s now up to CEO Tan to execute on his vision.

1 comment:

Peter A Delgado II said...

Great follow-up Ezra. I am buying more down here at these levels.
Driving sales in key at this point - if he can go from $3 mil (2013) to $7 mil in 2014, $16 mil in 2015, then this is a fantastic growth story and the stock goes to $10 - that is if someone doesn't come in and buy them.
Let's start looking at some dates - I would like to go and see Tiger's iScreen in person and bring some Chinese real estate connections to the table for them.