Clear Media Limited

Clear Media Limited is an outdoor media company in China. The principal activity of the Company is investment holding. It is engaged in the display of advertisements on bus shelters, unipoles and bus bodies. The Company created a bus shelters advertising network covering nearly 30 key cities in China, which include Beijing, Guangzhou, Shanghai, Chengdu, Nanjing, Shenzhen, Hangzhou, Xi’an Jinan, Shijiazhuang and others. The Company’s subsidiaries include China Outdoor Media Investment Inc., China Outdoor Media Investment (Hong Kong) Company Limited and WHA Joint Venture. The Company offers its services to sectors including beverages, telecommunications, food, and cosmetics and toiletries, among others.

Here are 3 things about Clear Media Limited:

1. Potential Acquisition Target

Clear Channel Outdoor owns 51% of Clear Media and has acted as a good steward of the company since its initial involvement and gives comfort that the company has benefitted from good corporate governance since then. While Clear Channel Outdoor is in turn, owned 90% by iHeartMedia (OTCPK:IHRT) and both are heavily indebted entities. The pressing need by Clear Channel/iHeart to reduce debt provides some optionality that Clear Media may be sold. Clear Media would be a very desirable asset for the leading global outdoor media companies such as JCDecaux who, with an EUR 6.63 billion market capitalisation and clean balance sheet, could easily afford such an acquisition.

iHeartMedia/Clear Channel are heavily indebted due to a leveraged buyout in 2008 led by Bain Capital and Thomas H Lee Partners. Clear Channel/iHeartMedia has been seeking to cut costs and selling assets. Recent examples of this include:

  • The sale of a 50% stake in Australia Radio Network for USD 222.5 million in February 2014
  • The anticipated sale of 411 broadcast tower sites to Vertical Bridge for up to USD 400 million
  • The potential sale of the USD 3 billion worth of European Assets (with a tentative bid from JCDecaux)
  • The sale of a 50% stake in Buspak (exterior and on-board advertising for buses throughout Europe) for USD 14 million in July 2014 to APN

Hence, this could act as a catalyst to unlock value if Clear Channel is forced to sell part or all of their ownership of Clear Media. The fall in the Euro has caused Clear Channel to put the sale of their USD 3 billion European assets on hold. This could cause Clear Channel to consider selling assets outside of Europe making Clear Media a prime target with the HKD pegged to the USD.

2. Dominance in China

As of today, Clear Media operates the most extensive standardised bus shelter advertising network in Mainland China, with a total of more than 45,000 panels covering 26 cities. They have a market share ranging from 60% to over 90% in top-tier cities. As seen in the pie chart below, Clear Media has the biggest market share within China. The next biggest competitor only owns 10,000 panels, translating to a 4.5x multiple that Clear Media has over their next biggest competitor.

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3. Valuation

Compared to Clear Media’s peers as seen in the table below, they are trading at much high valuation multiples. Currently, Clear Media is trading at 3.9x EV/EBITDA and 7.0x EV/EBIT. Whereas compared to its peers within the industry, they are trading at multiples in the high teens. Given Clear Media’s dominance within the Chinese market, one would expect it to be trading at a much higher valuation, or one that is closer to the industry’s average.

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