Focus Media Holding Ltd. (NASDAQ: FMCN) is down 6% right before the troubled stock is going to be featured as a short sell stock by Muddy Waters Research’s Carson Block. Now the attack is coming to CNBC. The Chinese outdoor advertising company has often been volatile, but this stock has gone from over $25.00 down to $16.02 after today’s 6% drop.
Muddy Waters initiated a STRONG SELL rating back on November 21 and shares have done extremely poorly ever since. That is an understatement. The updated ‘Strong Sell’ rating from today only outlines more and more caution. The allegations are many, from fraud to misrepresentations in the overall outdoor LCD ad market in China. The company has again addressed the report with an answer, no help yet.
Focus Media represents that is revenues were $516.315 million in 2010, $397.165 million in 2009, and then $369.554 million in 2008. Gross profit went back to positive in 2010 at $184.273 million, better than the -$213.257 posted in 2009 and the -$770.688 posted in 2008. Thomson Reuters still lists a consensus figure of $750.62 million in sales for 2011 and it sees $922.93 million for sales in 2012.
The consensus estimates for earnings are also $1.86 EPS for 2011 and $2.28 EPS for 2012. At $16.00, this sounds like a great value with growth still expected. If the research is accurate out of Muddy Waters, then you are seeing where a value stock is a value trap.
JON C. OGG