| Investors are hoping for a turnaround in 2009, but | | | | outlets. |
| considering the pain that has continued for more than a | | | | VisionChina is flexible in its dealings with local TV |
| year, they are reluctant to bet on it. The overall outlook | | | | stations. The company signs exclusive agency |
| for U.S. companies for 2009 is not good either, with | | | | agreements in tier-1 cities to take advantage of |
| negative GDP growth expected during the year. The | | | | already lucrative advertising markets and forms joint |
| economists' median forecast calls for U.S. gross | | | | ventures in tier-2 cities to lock in future growth |
| domestic product to fall by 1.5% in the first quarter of | | | | potential. |
| 2009 and GDP growth of 0.2% is expected in the | | | | The Company generated $29 million in revenue for |
| second quarter. The outlook for US companies and | | | | FY2007 with blistering growth of 266% to $106 million |
| consumers is bleak to say the least. | | | | estimated for FY2008 and further growth of 30-40% |
| The real question for investors, is where can they find | | | | expected in 2009. The Company's recent net margins |
| growth in an environment such as the one we are in | | | | are 40%+, including net profit of almost $49 million |
| now? | | | | expected in FY2008. At $7.17 per share as of January |
| If economists believe that in 2009 the US economy will | | | | 5th, VisionChina currently trades at an estimated PEG |
| be a repeat of 2008, then how can investors find a | | | | ratio of only 0.7x. |
| way to make money via the markets? | | | | VisionChina's growth drivers include: 1) sustainable |
| Since the overall outlook for U.S. companies for 2009 | | | | growth in China's advertising market, 2) increasing |
| is overwhelmingly negative, the lone bright spot in the | | | | advertising rates, 3) increasing viewership through |
| U.S. markets will be for China-based companies listed | | | | improving content, 4) increasing utilization rates, 5) |
| on the exchanges. While the U.S. economy is | | | | generating more revenue from direct sales and 6) |
| expected to decline in 2009, the economy in China is | | | | sales of program sponsorships. New drivers include |
| expected to grow by 8.5%. This trend is not about to | | | | expansion into new cities and properties, potential |
| go away either - the growth disparity is enduring and | | | | M&A opportunites, and potential new business |
| has been for some time (see below). In fact the U.S. | | | | models. |
| economy has not delivered economic growth above | | | | VisionChina's reliable revenue streams should ensure |
| 3% since 2004. In 2007, a few short years ago, | | | | attractive equity value appreciation in 2009. |
| America's economy grew at 2%, while China's grew | | | | Head of the Class: New Oriental is the largest provider |
| at a staggering 11.9%. With the consistent lackluster | | | | of private educational services in China. The |
| performance of U.S. stocks, it should come as no | | | | Company's selection of educational services includes |
| surprise to investors that US companies are not able | | | | English and other foreign language training, standard |
| to provide solid growth quarter over quarter. | | | | test preparation courses, as well as development and |
| US companies currently are unable to offer investors | | | | distribution of education content, software and online |
| the type of growth that is going on in China. The | | | | education. The Company's revenues grew 50% to |
| Chinese Government has been and is continuing to | | | | $202 million during FY2008 and are still projected to |
| drive China to become a world leader in almost every | | | | grow 40% in FY2009. The Company's net margins |
| sector. With the current fiscal measures they have | | | | are consistently 20+%, including net profit of $49 million |
| taken to assure this, we see China as a great | | | | in FY2008. At $55.38 per share as of January 5th, |
| investment for American investors for at least the | | | | New Oriental currently trades at an estimated PEG |
| next decade. | | | | ratio of only 0.9x. |
| So how can our members learn to profit from the | | | | New Oriental is the dominant player in its core |
| fastest growing economy in the World? Believe it or | | | | businesses, with 55-60% market share in overseas |
| not, it's not as hard as you think. Many Chinese | | | | test prep, over 10% share of the domestic test prep, |
| companies have decided to tap into the US economy | | | | and 2-3% market share of the highly fragmented |
| by going public on a US exchange. The Chinese | | | | English language training market. |
| realized that there is a lot of money here and by | | | | New Oriental is poised to take further market share in |
| taking their companies public on a US exchange, they | | | | the large and growing English language training and test |
| can raise millions of dollars in fresh capital. | | | | prep markets. It has the most extensive program |
| With many Chinese companies growing at 30% per | | | | offering targeting students from ages 5-35+, with the |
| quarter, and trading at similar PE's to their US | | | | largest student enrollment and with the broadest |
| counterparts, the opportunity for US investors to profit | | | | geographic coverage. As the dominant player in the |
| from this is unprecedented. Now you have the ability to | | | | market, New Oriental enjoys sustainable advantages |
| buy stock in a Chinese company, just as easy as you | | | | that are difficult for competitors to replicate:o Premium |
| can buy stock in a company like Microsoft. | | | | brand - Established in 1993, the Company is the most |
| China is a preferred market for global investors in | | | | well known private education brand in China. The |
| 2009 because for one, the central government has a | | | | Company differentiates itself with a strong corporate |
| healthy fiscal balance sheet and has the option to | | | | culture and unique teaching style.o Largest nationwide |
| adopt aggressive fiscal and monetary stimulus | | | | network - New Oriental's 43 schools and 179 learning |
| measures to support growth. Unlike Russia, Brazil and | | | | centers span 40+ cities across China. The Company |
| India, China will benefit significantly from a collapse in | | | | plans to continue to expand both geographically and by |
| commodity prices. | | | | more deeply penetrating existing cities.o Unrivalled |
| China has committed to spend $400 billion on new | | | | scale in China - Since its inception, New Oriental has |
| infrastructure projects over the next five to seven | | | | educated over 5 million students, with annual enrollment |
| years. That $400 billion will turn into more than $2.8 | | | | topping 1.5 million entering CY2009. This large active |
| trillion of economic production by the time it multiplies | | | | student and alumni base induces viral marketing and |
| throughout the banking system. | | | | promulgates network effects, allowing the company to |
| With a population of 1.3b and an ever growing | | | | leverage this large student base to introduce more |
| middle-class, the consumer spending estimates are off | | | | products and services. |
| the charts and one of the primary engines for growth | | | | A summary of New Oriental's product offerings is as |
| in major economies is consumer spending. | | | | follows: |
| In China the growth in disposable income and | | | | The Company's profit margins are expected to |
| consumer expenditures has outpaced and will continue | | | | expand further as capacity utilization improves at the 6 |
| to outpace that in the U.S. by a wide margin. For | | | | schools and 71 learning centers New Oriental |
| example, consumer expenditures in China grew by | | | | aggressively rolled out in FY2008. 4-5 more new |
| 14% in 2008 vs. only 1% for the U.S. The results in | | | | schools (cities) and 40-50 new learning centers are |
| coming years will be similar as U.S. consumers begin to | | | | anticipated in FY2009, as New Oriental continues to |
| pay off consumer debt and reverse a trend of | | | | extend service to China's larger cities. The result will be |
| essentially negative savings rates. Meanwhile Chinese | | | | high potential for stock appreciation. |
| consumers maintain savings rates of 50% and have | | | | Aiming for the Sky: AirMedia is China's largest digital |
| virtually no consumer debt. There is no question where | | | | out-of-home media company focusing on air travel |
| the bulk of future growth from consumer spending will | | | | advertising with a network covering 50+ airports and 9 |
| come from. | | | | major airlines, with over 2,000 airport screens and the |
| Chinese companies listed on U.S. exchanges will deliver | | | | right to display ads on 16,000 airplane screens. The |
| growth in revenue and profits that cannot be matched | | | | Company has secured most of its partnerships (50%+ |
| by most U.S. companies, especially in this economy. | | | | for airports and 80%+ for airlines) exclusively, with all |
| Unlike the U.S., China has high foreign reserves, a | | | | but one of concession contracts lasting until 2010. |
| healthy fiscal balance, a high savings ratio and a low | | | | The Company produced $42 million in revenue for |
| government debt level, which enables policymakers to | | | | FY2007 with staggering growth of 196% to $123 million |
| adopt aggressive fiscal stimulus measures to boost | | | | estimated for FY2008 and further growth of over |
| economic growth. Also, after the recent collapse in | | | | 40% expected in 2009. The Company's recent net |
| commodity prices, the CPI is now under control. | | | | margins are well over 20%, with net profit of over $33 |
| Policymakers have the option to loosen the monetary | | | | million expected in FY2008. At $5.76 per share as of |
| policy aggressively to support growth without risking | | | | January 5th, Airmedia currently trades at a miniscule |
| future inflation. | | | | estimated PEG ratio of 0.3x. |
| China is no longer the Forbidden City and the Great | | | | The Chinese Civil Aviation Administration forecasts air |
| Wall... it has become a country of bustling cosmopolitan | | | | passenger rates will grow 14% annually from 2005 to |
| cities, massive construction, manufacturing, shopping | | | | 2010. For the corresponding period, the total number of |
| malls, Internet and cell phone users, Wal-Mart, and | | | | commercial aircrafts is expected to increase to 1,580 |
| Starbucks. Today's smart investors are looking beyond | | | | from 863. The Chinese government will also invest |
| their own borders for high growth opportunities. Many | | | | $17.4 billion in infrastructure construction, and expects |
| are focusing on China's ever-expanding economic pie. | | | | the total number of airports will rise to 180 in 2010 from |
| Consider these facts:o 100 cities with over 1 million | | | | 142 in 2005. |
| people (only 9 in the U.S.)o 300 million people under age | | | | On December 29, 2008, AirMedia's board approved a |
| 14o #1 market for mobile phones with 461 million users | | | | buyback of up to $50 million of its outstanding |
| (larger than the entire U.S. population)o #2 market for | | | | American Depositary shares, providing further support |
| Internet users at 137 million | | | | to stock price appreciation in 2009. |
| Now given the recent declines in the stocks of | | | | Conclusion: The three companies mentioned above will |
| Chinese companies listed on U.S. markets during 2008, | | | | benefit disproportionately from the positive trends of |
| there are plenty of bargains to be found to generate | | | | consumer spending and economic growth in the |
| outstanding returns in 2009. Three stocks to focus on | | | | Chinese economy that cannot be found in the U.S. |
| include VisionChina Media, Inc. (NasdaqGM: VISN), New | | | | economy. And since they are all listed on U.S. |
| Oriental Education & Technology Group, Inc. | | | | exchanges, they can be bought just as easily as any |
| (NYSE: EDU), and AirMedia Group, Inc. (NasdaqGM: | | | | other U.S. stock with prospects that are not nearly as |
| AMCN). | | | | bright. The strong economic fundamentals supporting |
| An Eye on the Future: VisionChina is China's leading | | | | these companies and their attractive valuations ensure |
| national, real-time, digital mobile TV platform, covering | | | | little downside risk with plenty of upside potential that |
| 14 cities and more than 25,000 buses with over 50,000 | | | | simply cannot be found among most U.S. companies. |
| panels. Its key business is selling advertising timeslots | | | | As an investor, it is your job to find investments that |
| on its mobile TV platform. VisionChina's cooperation | | | | have the highest possibility of providing the largest |
| with local TV stations makes the company unique | | | | return on investment. As you just learned, US |
| among China's publicly listed media companies, allowing | | | | companies are unable to produce the types of returns |
| for a live broadcasting network, the provision of | | | | an emerging growth country like China can. |
| content, and license ownership through partnerships | | | | These opportunities are the ones every investor |
| with local stations. VisionChina's long-term exclusive | | | | should research and look for when planning their |
| agency contracts and joint ventures with local TV | | | | investments. |
| stations set a high entry barrier for competitors, as the | | | | Keep an eye out for future reports from China |
| company has exclusive usage rights to bus media | | | | Research Group! |
| resources, mobile TV licenses, and mobile broadcasting | | | | |