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TOM.COM LIMITEDConsolidated China’s Outdoor Media Market
27th March 2002Hong Kong
I. TOM Outdoor Media Network
3
A Leading Nationwide Outdoor Media Network
China
Consolidated 12 leading regional outdoor media companies Established a presence in 22 cities
4
HK$'million
Existing7 Companies
5 NewAcquisitions
TOTAL
Revenue 241 129 370
EBITDA 103 47 150
Profit before tax 86 44 130
2001 A
5 New Acquisitions Boost Revenue and Profit by ~50%
Note 1: Existing 7 Companies include Fench Media, Maya Cultural, Perfect Team, Chunyu, Qilu, Tianming, Yanhuang
Note 2: 5 New Acquisitions include New Star, Sano, Southwest International, Bomei, and Seeout (Source: Management Accounts)
5
TOM is the Dominant Company for Billboards & Unipoles
TOM’s Outdoor Media Mix
Total area: 170,000 m2
Why Focus on Billboards & Unipoles? Account for ~50% of outdoor ad expenditure in China ( 成科互動 ) Lower CAPEX Longer contract terms – more stable
Why Diversified Assets? TOM acquires the most effective and the best-selling assets in each city One-stop outdoor advertising solution
6
Mix of Advertising Expenditure (2000)
Why Billboards & Unipoles?
In the US, billboards command the highest operating margins and dominate outdoor advertising sales
Operating Margin Range
50 - 55%45 - 50%
20 - 45%
Source: Morgan Stanley report (January 2002)
7
Immediate Expansion Plan
Total Area of TOM Outdoor Media Assets (m2)
Total area: 210,000 m2
24% growth
170,000 170,000
40,000
m2
II. New Acquisitions
9
Expansion Strategy: Planned and Systematic Execution
PROVINCE / MUNICIPALITY CITY COMPANY
Beijing Perfect Team/Yanhuang
Shanghai Maya Cultural
Guangdong Guangzhou Perfect Team
Henan Zhengzhou Tianming
Yunnan Kunming Fench Media
Sichuan Chengdu Southwest International
LiaoningShenyang Sano
Dalian New Star
ShandongJinan Qilu
Qingdao Chunyu
FujianFuzhou Seeout
Xiamen Bomei
FIRS
T BA
TCH
SECO
ND
BATC
H
China’s 3 most important economic regions and the top 3 cities in outdoor advertising expenditure
China’s most populous province
Southwest: Leverage market share leadership to gain pricing advantage
Province of twin cities: Achieve leadership in Fujian Province by dominating the twin cities
Northeast: Acquire the most profitable companies with quality assets and efficient cost structures as the base to expand market share
10
A Thorough, Systematic Acquisition Evaluation Process
Conducted research on 164 outdoor media companies in 23 cities
Short listed 61 companies for further analysis
On-site evaluation of 24 companies in 14 cities
Completed over 30 evaluation reports
7 transactions completed and 5 in MOU stage
Q4 Q2 Q3 Q4 Q12000 2001 2001 2001 2002
11
Prevailing Terms for Outdoor Media Acquisitions
Acquisitions are typically financed with less than 50% in cash and the rest in TOM shares issued at HK$5.51
PE ratio is typically 9.5x for outdoor business and 4.75x for agency business
The consideration will be adjusted proportionate to any shortfall of guaranteed profit in the first year:
Profit Guarantee:
• Minimum CAGR of 15%
• Any shortfall of guaranteed profits in the next 2-4 years will be compensated by dividend entitlements or cash
Year1 Actual Profit
Year1 Guaranteed Profit
OriginalConsideration
AdjustedConsideration
= x
Cost of acquiring 12 companiesCash: HK$ 194M
TOM Shares: HK$ 741M
Additional guarantees
If receivables are not recovered within a certain period from the execution of definitive agreements, the consideration will be adjusted downward accordingly
12
New Star: The Largest & Most Profitable Operator in Dalian
The largest outdoor media company in Dalian, Liaoning Province
Dalian is the second busiest port city in China and the richest city in the northeast region
Client base includes domestic and international advertisers:
China Telecom, Jitong Telecom, Shanghai Pudong Development Bank, China National Petroleum Corp, Honghe Tobacco, Tsingdao Beer, Mitsubishi …
Assets Units Area (sq. m.)
Unipoles 29 6,979
Giant Billboards 4 990
Lightboxes 21 127
Total 54 8,096
Financial Highlights (RMB'M) 2000 2001
Revenue 14.6 15.9
EBITDA 8.5 10.4
EBITDA Margin 58% 65%
Profit After Tax 7.8 8.0
Net Profit Margin 53% 50%
Average occupancy rate: 90%
Source: Management Accounts
13
New Star Transaction Highlights
Acquisition
Consideration will be adjusted proportionate to any shortfall of guaranteed profit in 2001
RMB'MInterest to be
acquiredConsideration Cash %
TOM sharesissued at HK$5.51
%
New Star 60% 67.7 19.2 28% 48.5 72%
RMB’M
ActualGuarantee
Minimum 15% CAGR gua
ranteed
Profit After Tax Guarantee
Source: Actual figures based on Management Accounts
Profit Guarantee
Any shortfall of guaranteed profits in 2002-2005 will be compensated by dividend entitlements or cash
14
Sano: The Largest Outdoor Media Company in Shenyang
The largest bus shelter network in Shenyang, Liaoning Province
Shenyang recorded the highest outdoor advertising expenditure (RMB512 million) in China after Beijing, Shanghai and Guangzhou
Client base includes domestic and international advertisers:
Sanjiu Enterprises Group, Legend, China Merchants Bank, Intel, Siemens, Motorola, Rado, Marlboro, Carlsberg …
Assets Units Area (sq. m.)
Bus Shelters 412 2,890
Billboards 17 4,186
Unipoles 28 738
Total 457 7,814
Average occupancy rate: 70%
Financial Highlights (RMB'M) 2001
Revenue 18.6
EBITDA 8.4
EBITDA Margin 45%
Profit After Tax 6.8
Net Profit Margin 37%
Source: Management Accounts
15
Sano Transaction Highlights
RMB'MInterest to be
acquiredConsideration Cash %
TOM sharesissued at HK$5.51
%
Sano 60% 36.1 15.0 42% 21.1 58%
Acquisition
Consideration will be adjusted proportionate to any shortfall of guaranteed profit in 2002
Minimum 15% CAGR gua
ranteed
Profit After Tax Guarantee
Source: Actual figures based on Management Accounts
Profit Guarantee
Any shortfall of guaranteed profits in 2003-2005 will be compensated by dividend entitlements or cash
ActualGuarantee
RMB’M
16
Southwest International: The Largest Operator in Sichuan Province
The largest outdoor media company in Sichuan Province
Based in Chengdu which is ranked among China’s top 10 cities in terms of outdoor advertising expenditure (RMB263 million)
Highest number of billboards along Chengdu-Chongqing highway
Client base includes domestic and international advertisers:
China Mobile, PICC, Jia Ling Motorcycle, Wu Liang Ye, Luzhou Laojiao …
Assets Units Area (sq. m.)
Unipoles 30 10,530
Billboards 103 15,498
Lightboxes 157 3,343
Total 290 29,371
Average occupancy rate: 80%
Financial Highlights (RMB'M) 2000 2001
Revenue 14.5 28.6
EBITDA 6.3 12.3
EBITDA Margin 43% 43%
Profit After Tax 5.3 9.6
Net Profit Margin 37% 34%
Source: Management Accounts
17
Southwest International Transaction Highlights
RMB'MInterest to be
acquiredConsideration Cash %
TOM sharesissued at HK$5.51
%
Southwest International 70% 46.4 19.5 42% 26.9 58%
Acquisition
Consideration will be adjusted proportionate to any shortfall of guaranteed profit in the 12 months after the execution of a definitive agreement
ActualGuarantee
Profit After Tax Guarantee
Source: Actual figures based on Management Accounts* 12 months after execution of a definitive agreement
RMB’M
Profit Guarantee
Non-management shareholder (government body) will exit – transaction priced cheaper at 7x PE with 1 year profit guarantee.
18
Bomei: The Largest Operator in Xiamen
The largest outdoor media company in Xiamen, Fujian Province
Xiamen is a Special Economic Zone that is expected to be the key beneficiary of increasing trade between Mainland China and Taiwan
Client base includes domestic and international advertisers:Coca-Cola, Ericsson, Nokia, Huiquan Beer, Honghe Tobacco, British American Tobacco, Davidoff …
Assets Units Area (sq. m.)
Giant Billboards 21 5,529
Unipoles 9 1,956
Lightboxes 60 354
Total 90 7,839
Average occupancy rate: 71%
Financial Highlights (RMB'M) 2000 2001
Revenue 21.0 19.8
EBITDA 5.7 6.2
EBITDA Margin 27% 31%
Profit After Tax 4.6 5.0
Net Profit Margin 22% 25%
Source: Management Accounts
19
Bomei Transaction Highlights
RMB'MInterest to be
acquiredConsideration Cash %
TOM sharesissued at HK$5.51
%
Bomei 60% 25.7 10.8 42% 14.9 58%
ActualGuarantee
Profit After Tax Guarantee
Source: Actual figures based on Management Accounts
Acquisition
Consideration will be adjusted proportionate to any shortfall of guaranteed profit in 2001
Profit Guarantee
Any shortfall of guaranteed profits in 2002-2004 will be compensated by dividend entitlements or cash
Minimum 15% CAGR gua
ranteed
RMB’M
20
Seeout: The Largest Operator in Fujian Province
The largest outdoor media company in Fujian Province, the seventh highest GDP per capita in China
Based in Fuzhou, the capital city of Fujian Province
Client base includes domestic and international advertisers:
Huiquan Beer, China Mobile, China Unicom, China Minsheng Bank, China Construction Bank, pharmaceutical companies …
Assets Units Area (sq. m.)
Unipoles: Expressway 21 5,292 City 36 1,720
Billboards 15 5,160
Lightboxes 48 691
Total 120 12,863
Average occupancy rate: 83%
Financial Highlights (RMB'M) 2000 2001
Revenue 42.5 54.0
EBITDA 9.2 13.2
EBITDA Margin 22% 24%
Profit After Tax 7.7 11.1
Net Profit Margin 18% 21%
Source: Management Accounts
21
Seeout Transaction Highlights
RMB'MInterest to be
acquiredConsideration Cash %
TOM sharesissued at HK$5.51
%
Seeout 60% 54.3 22.6 42% 31.8 59%
ActualGuarantee
Profit After Tax Guarantee
Source: Actual figures based on Management Accounts
Acquisition
Consideration will be adjusted proportionate to any shortfall of guaranteed profit in 2001
Profit Guarantee
Any shortfall of guaranteed profits in 2002-2004 will be compensated by dividend entitlements or cash
Minimum 15% CAGR gua
ranteed
RMB’M
III. TOM Outdoor Media Group
23
TOM Outdoor Media Group
TOM Outdoor Media Group
FENCHMEDIA
MAYACULTURAL
PERFECT TEAM
NEW STAR
CHUNYU TIANMINGQILU
YANHUANGSANOSOUTHWEST
INTERNATIONAL
100% 50% 65% 50% 60% 50%
60% 50%60% 70% 60% 60%
Acquisition at MOU stage
Unified OperationsUnified OperationsCentralised ManagementCentralised Management
Consistent BrandConsistent Brand
BOMEI SEEOUT
24
Integrating Outdoor Companies
Unified logos in line with TOM corporate identity
Adopt system-wide financial and operating standards
Compare monthly operating results of individual outdoor business units and benchmark key performance indicators against international best practices
Best performing sales teams conduct training sessions across business units
Developing a coordinated pricing structure
Developing a proprietary Web-based outdoor media asset management system to standardise client management and optimize the utilization of outdoor media inventory
25
A Centralised Asset Management System
INTERNAL
• Media Asset Management• Media Planning & Schedulin
g• Grading of Outdoor Media
• Sales• Proposal & Booking Manage
ment• Campaign Monitoring
• Process• Standardisation & Streamlin
ing• Authorisation Control
• Management• Management Reporting
EXTERNAL
• Instant Online Outdoor Media Search
• Location• Medium type• Performance
• Online Proposal & Booking Request
• Online Monitoring of Individual Campaigns
• Media Asset Evaluation
• Market Intelligence Sharing
TOM Outdoor Media Asset Management System
26
Strengths of TOM Outdoor Media Group
• The largest outdoor media network in China – 170,000 m2 of advertising space covering 6 provinces & 22 cities
• Business units are leading local operators with quality assets
• High occupancy rates, High profit margins
• Diversified outdoor media base dominating unipoles and billboards
• Quality client base
• Strong management team
• Unique, supportive relationship with government authorities
27
Offer Full Range Professional Services To Clients
Outdoor Campaign Management
Contract Management
Outdoor Media Consultancy
Outdoor Media Planning & Buying
Outdoor Site Monitoring
Cross-Media Central Buying
Visual Production
TOTA
L O
UTD
OO
R SO
LUTI
ON
TOTA
L O
UTD
OO
R SO
LUTI
ON
28
HK$'million
TOMOUTDOOR
CLEARMEDIA
MEDIANATION
MPI
Revenue 370.0 355.0 473.9 281.0
Mainland China 370.0 355.0 311.5 192.9
Hong Kong - - 162.4 88.1
EBITDA 150.0 153.6 86.9 78.2
Profit before tax 130.0 70.8 14.0 39.4
EBITDA margin 40% + 43% 18% 28%
PBT margin 35% + 20% 3% 14%
2001
Aiming to be the Most Profitable Outdoor Media Company in China
Note 1: TOM’s financials represent full-year consolidation of the 2001 actual results of its 12 outdoor companies
Note 2: Clear Media and MPI financials are actual results, while MediaNation’s are based on estimates by Deutsche Bank
The 4 top players combined have <30% of Mainland China’s estimated outdoor ad market of
US$665M in 2002 (ZenithMedia)
Room for growth & cooperation
Targeting HK$460 M Revenue in
2002
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