凤凰卫视 (2008.HK) 具有品牌 内容 多渠道传播优势的跨媒体集团买入 目标股价 : HK$ 2.88 当前股价 :HK$ 2.45 公司概览

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1 HK$ 2012 年 10 月 28 日 凤凰卫视 (2008.HK) 具有品牌 内容 多渠道传播优势的跨媒体集团买入 目标股价 : HK$ 2.88 当前股价 :HK$ 2.45 报告综述短期来看, 新媒体 ( 网络 ) 和户外媒体两块业务的增长将保障凤凰卫视集团近期及未来的收入增长 ; 长期而言, 作为具有品牌 内容 传播渠道的跨媒体集团, 凤凰卫视将在国内文化产业重要性整体提升的大背景下长期受益 基本面 & 催化因素 凤凰卫视集团作为在全世界范围内经营传播的华语媒体, 已覆盖欧洲 亚洲 美洲和非洲的 155 个国家和地区, 在国内外都享有广泛的知名度和频道满意度 据第九届 中国 500 最具价值品牌 排行榜统计, 公司的品牌价值达到 亿元 耕耘多年的电视业务凭借高质量节目已树立起了品牌, 吸引了众多中高端收入的收视群体, 从而形成传播价值, 其电视广告收入连续多年保持稳定增长 上半年在广告行业整体增长不景气的情况下依然同比增长 23% 及时转型切入以互联网为主的新媒体业务, 当前按用户流量及广告收入计算, 凤凰网已成为国内第五大门户网站, 互联网广告收入增速连续多个季度超过其它门户网站 除传统门户广告之外, 凤凰视频和手机凤凰未来将成为新的收入增长点 除新媒体业务外, 凤凰的户外 LED 广告屏业务也蓬勃发展, 已在内地 15 个核心城市建立并自行拥有 49 块大型户外 LED 显示屏, 成为内地该领域内最大的媒体运营商 预计未来三年户外媒体业务的平均收入增速将保持在 25% 以上 估值 我们对凤凰卫视的电视广播 新媒体 户外媒体业务分别作收入预测, 并按照公司所处的行业地位以及品牌优势按未来三年每股收益的 16 倍市盈率作为目标股价, 我们预计凤凰卫视的 2013 年底的合理股价为 2.88 港币, 当前 EPS 为为 0.18 港元, 建议买入 关键假设 & 风险因素 近期中国经济增速的放缓给广告传媒全行业的收入增长都带来了负面影响 政府对于媒体的监管和引导, 对行业的鼓励政策将对行业发展带来影响 盈利预测 ( 一般情形 ) 截至 12 月份 2010A 2011A 2012E 2013E 2014E 营业额 ( 百万港元 ) 2,566 3,643 4,227 5,083 6,049 增长 ( 同比,%) 68% 42% 16% 20% 19% 净利润 ( 百万港元 ) ,088 增长 ( 同比,%) 48% n/a n/a 29% 19% 每股收益 ( 港元 ) 0.09 (0.02) 每股经营现金流 ( 港元 ) 0.12 (0.18) 市盈率 (x) 23.1 n/a 市净率 (x) 每股派息 ( 港元 ) 资料来源 : 国信香港, 彭博 公司概览 背景资料 凤凰是少数几个获得中国大陆部分地区落地权的境外媒体之一 旗下业务已涵盖电视 周刊 新媒体 户外媒体和广播 其中电视广播业务日趋成熟, 而新媒体业务已于 2011 年在美国分拆上市, 户外媒体业务也在上市进程中, 两块业务均处于快速上升通道 公司数据 市值 ( 百万港元 ) 12,228 流通股股数 ( 百万股 ) 4,991 大股东 (%) 刘长乐 (37.1%) 公众持股量 (%) 17.1% 股价走势图 数据来源 : 彭博, 数据截至 2012 年 10 月 28 日 股价表现 (%) 1 个月 3 个月 12 个月 凤凰卫视 恒生指数 国信观点较市场观点 稍为悲观 ( 港元 ) 基本情形市场观点 EPS EPS EPS 为什么? Oct/2011 Dec/2011 Feb/2012 Apr/2012 Jun/2012 Aug/ HK(HK$,LHS) HIS(RHS) 21,000 19,000 17,000 15,000 我们对公司 2012 年业绩的预期较市场观点略微悲观, 因广告主支出受 2012 年经济放缓的影响比预想的更加严峻, 同时凤凰新媒体全年的收入增速可能略低于市场普遍预期, 但我们对于凤凰卫视所处的广告传媒行业长期发展持乐观态度 分析师邱琳电话 : 证监会中央编号 :AYI607 销售联系人 Roger Chiman 电话 : (852) roger.chiman@guosen.com.hk 机构销售及交易全球总监, 董事总经理 1

2 HK$ October 28th, 2012 Target Price: HK$ 2.88 Current Price: HK$ 2.45 BUY Transitioning into a full-media group in the new era Summary: In the short term, the outdoor and new media (Internet) businesses will guarantee the revenue growth of Phoenix Satellite Television. In the medium term, as a cross-media group with strong brand influence, premium contents and diversified transmission channels, it will undoubtedly continue to expand as the cultural industry gains in importance in China. Fundamentals & drivers (base case) Phoenix Satellite Television is a global Chinese-language media company with a presence in 155 countries and regions in Europe, Asia, the US and South Africa. It enjoys strong brand awareness and a high level of audience satisfaction. The group has enjoyed stable television advertising revenue growth for many years as it has attracted a number of middle and high-income audience with premium programmes. The group should promote transition by introducing new media business based on Internet and mobile internet. Ifeng.com has already become the fifth largest web portal in China in terms of user traffic and advertising revenue. Its mobile traffic is also booming The group s outdoor LED billboard advertising business is also flourishing. It is the largest media operator in the sub-sector in China. We expect the average revenue growth of its outdoor media business will remain above 25% in the coming three years. Valuation screening (base case) We estimate a reasonable share price of HK$2.88 for 2013 based on a PE of 16x, and suggest buying the stock. The estimated EPS for 2013 is HK$0.18 Key assumptions & risks (base case) Recently the economic slowdown in China has had an adverse impact on the revenue growth of the entire advertising media industry. The government s regulation and guidance on the media and its incentives to the sector will have an influence on the sector s development. Financial summary (base case) Year to Dec 2010A 2011A 2012E 2013E 2014E Turnover (HKD mn) 2,566 3,643 4,227 5,083 6,049 Chg (%) 68% 42% 16% 20% 19% Net profit (HKD mn) ,088 Chg (%) 48% n/a n/a 29% 19% EPS (HKD) 0.09 (0.02) CFO per share (HKD) 0.12 (0.18) P/E (x) 23.1 n/a P/B (x) Dividend per share (HKD) Source:, Bloomberg Company overview Background Phoenix is one of the few overseas media companies that have secured landing rights in China. Its TV business has become increasingly mature while the new media business was listed in the US as a spin-off in Its outdoor media business is also expected to be listed. Both its new media and outdoor media businesses are on track for rapid growth. Key data Market cap (HK$ mn) 12,228 Shares outstanding (mn) 4,991 Major shareholders (%) Liu Changle(37.1%) Free-float (%) 17.1% Price performance vs HSI Oct/2011 Dec/2011 Feb/2012 Apr/2012 Jun/2012 Aug/2012 Source: Bloomberg( on Oct 28th, 2012) Price performance (%) 1M 3M 12M Phoenix Satellite Television HSI Guosen vs Consensus Slightly pessimistic (HK$) Guosen forecast Consensus EPS EPS EPS Why? 2008 HK(HK$,LHS) HIS(RHS) 21,000 19,000 17,000 15,000 Our forecasts for 2012 are slightly pessimistic versus consensus, as advertisers are more aggressive in cutting expenses than we had expected amid the economic slowdown. However, we are upbeat about the long-term development of the advertising media sector. Analyst Eric Qiu (Media, Software & Internet) Tel: (852) lin.qiu@guosen.com.hk SFC CE No.: AYI706 Sales contact Roger Chiman Tel: (852) roger.chiman@guosen.com.hk Managing Director 2

3 Business Overview Phoenix Satellite Television should proactively make a timely transition. It has commenced multi-media operations with a presence in many regions and industries, striving to become a world-class media organisation like Time Warner, News Corporation and BBC. Established in 1996, Phoenix Satellite Television has developed into an influential international media group among the Chinese around the world. The company maintains its advantages in the television broadcasting sector and at the same time it is exploring new businesses. It has successfully listed its new media operation as a spin-off, and its outdoor media operation is also expected to be listed. The company is gradually seeing its television broadcasting, new media and outdoor media businesses grow simultaneously. Television broadcasting business: it creates high-quality programmes, targets middle to high-income earners and helps high-end advertisers with brand marketing. Like in most other markets, television in China remains advertisers preferred channel for branding and promotions. Currently, the bid prices for advertising slots for the auctions by both CCTV and major local television stations are steadily rising. Meanwhile, the industrial upgrading and integration of various sectors in China will continue to enlarge the entire advertising market. New media business: it enjoys advantages in terms of brand influence, content and cost, and the growth of this business has far outpaced the industry average. The company s Internet advertising revenue has been growing by more than 100% per year for three straight years, and is expected to continue to grow at an average rate of 40% per year in the coming three years. Apart from ifeng.com, websites like v.ifeng.com and 3g.ifeng.com are likely to act as new engines for growth. China s move to converge the telecommunication, Internet and broadcasting networks into one complete system and the advancement of smart television will also enhance the company s strength in terms of content. Outdoor media business: the LED outdoor media segment has become the fastest-growing market in China s media & advertising sector. The company made up more than 30% of the total revenue of the market in Its subsidiary, Phoenix Metropolis Media, has set up more than 50 large LED displays in major high-traffic areas in 15 leading cities in China including Beijing, Shanghai, Guangzhou and Shenzhen. The company is still expanding the business and it s expected to achieve an average revenue growth of 30% in the coming three years. 3

4 Content Overview A leading cross-media brand in China Powerful shareholders Cross-media operations boost Phoenix s growth... 6 Catalysts TV broadcasting business: targets high-end audience through premium contents and maintains steady revenue growth China s advertising industry sees continued revenue growth Pre-payments received by CCTV from its advertising auctions have increased at a double-digit rate for 11 consecutive years and it rose to a new high in Phoenix has strong brand equity, contents and celebrity anchors Channel penetration ratio continues to grow Phoenix s programmes are popular and advertisers recognise its media influence New media business: advertising revenue from web portal continues to grow significantly; video advertising and mobile Internet businesses will become important drivers to boost revenue growth The increase in the number of advertisers and the average revenue generated from each advertiser will prompt the growth in revenue from web portals Phoenix is likely to benefit from the continuous growth of China s online video advertising market Revenue from mobile Internet will grow significantly Outdoor media business: scrambles for resources to boost revenue Phoenix has completed the preliminary rollout of its LED display network in tier-1 cities and it is expanding to more cities Phoenix Metropolis Media has distinct advantages over competitors Forecasts & Valuation Profit forecasts Base-case forecasts Valuation screening Risks Closing notes to the buy-side analyst

5 Overview 1 A leading cross-media brand in China 1.1 Powerful shareholders After more than a decade of development, Phoenix Satellite Television has gradually become a media brand well-known among the Chinese people around the world, with operations in various types of media. Phoenix Chinese Channel came on air in After more than a decade of development, the group now has six channels, including Chinese Channel, InfoNews Channel, European Channel, North America Chinese Channel, HK Channel and Movies Channel. It also owns several media platforms, including Phoenix Weekly Magazine, Phoenix New Media, an outdoor media business, and Phoenix Radio. Phoenix Satellite Television has gradually become a media brand well-known among the Chinese people around the world. Major shareholders, besides the company s chairman Liu Changle, also include China Mobile, News Corporation and Bank of China. Phoenix s shareholders include major companies such as China Mobile, News Corporation and Bank of China. Exhibit 1: Ownership of Phoenix Satellite Television Liu Changle China Mobile 93.3% 100% News Corporation Bank of China 100% 100% Today's Asia Extra Step Star Entertainment China Wise International the public 37.3% 19.7% 8.4% 17.1% 17.5% Phoenix Satellite Television (2008.HK) 45.5% 51.7% 100% Phoenix New Media (FENG.US) Phoenix Metropolis Media Phoenix Radio (Hong Kong) Source:, statistics of the company Phoenix is one of only a few foreign media companies to have landing rights in China. Phoenix Satellite Television is one of only a few foreign media companies that have obtained landing rights in China. It was listed on the Hong Kong GEM board in 2000, and it transferred to the main board in It is one of the most important listed companies in the cultural communication sector. Phoenix Satellite Television is mainly based in Hong Kong and Beijing, and it employs more than 2,500 people. Its news centre in Hong Kong was open in Besides, its Phoenix International Media Center, which is situated in the south-western corner of Beijing Chaoyang Park, will also be put into operation soon, which is expected to be another landmark of the capital city. Overview 5

6 Exhibit 2: Milestones Phoenix Satellite Television Time Milestone 1991 The launch of STAR Chinese Channel under Phoenix s predecessor - the Satellite Television (now known as STAR ) News Corporation acquired STAR, and partnered with strategic investors like Liu Changle (current Phoenix chairman) Phoenix Satellite Television was established, and STAR Chinese Channel was renamed as Phoenix Chinese Channel and re-launched Phoenix provided 60 hours of live news coverage of the Hong Kong handover ceremonies 1998 The launch of Phoenix Movies Channel Phoenix Satellite Television was listed on the Hong Kong GEM board Phoenix became famous for providing long-time live news report of the 911 attacks in 2001 and the Iraq War in Phoenix Satellite Television was selected as one of China s 500 Most Valuable Brands 2006 Phoenix Satellite Television was selected as one of the top ten TV brands under China s top 100 media brands 2006 China Mobile bought 19.9% of Phoenix Satellite Television from STAR Group for HK$1.2 billion 2008 Phoenix Satellite Television was listed on the Hong Kong main board 2009 Phoenix Satellite Television relocated its headquarters in Hong Kong to the new Tai Po Industrial Estate 2011 The launch of Phoenix Hong Kong Channel Phoenix New Media Limited became listed on the New York Stock Exchange The group s outdoor media business accepted pre-listing tutoring in Chinese Mainland, and is preparing to be listed separately. Source:, public statistics 1.2 Cross-media operations boost Phoenix s growth Phoenix Satellite Television started its business in the TV broadcasting sector. It has experienced rapid growth since its launch in 1996, and its TV broadcasting revenue exceeded HK$1 billion in 2007, higher than all local Chinese television stations and only second to CCTV. After a temporary slowdown during the Financial Tsunami from 2008 to 2009, the group returned to revenue growth of above 20% for its television broadcasting business in 2010 and 2011, and the group s revenue growth exceeded 40% during the period. The group s revenue totaled HK$3.64 billion in Forecasts & assumptions (future revenue growth) 2012 HK$4.23 billion 2013 HK$5.08 billion 2014 HK$6.05 billion Exhibit 3: Revenue growth trend and forecasts for Phoenix Satellite Television 6,000 HK$ million 5, , , ,577 3,000 1,314 1, , ,072 2,176 2,394 2,633 1, ,082 1,283 1,332 1, A 2008A 2009A 2010A 2011A 2012E 2013E 2014E Television broadcasting New media Outdoor media Other businesses Source:, public statistics Currently the company owns six television channels, including Chinese Channel, InfoNews Channel and Movies Channel, etc. Apart from these, its new media business, which comprises of Internet web portals, online videos, 3g.ifeng.com platforms and its outdoor LED large-screen advertising business, is growing even faster. Its television broadcasting business accounted for less than 60% of total group revenue in 2011, down significantly from 90% in We expect the group will see balanced development of its television broadcasting, new media and outdoor media businesses in future. Overview 6

7 Exhibit 4: Revenue composition of Phoenix Satellite Television Revenue composition for 2008 Revenue composition for 2011 Estimated revenue composition for % 2% 2% 4% 3% 11% 13% 49% 30% 57% 36% 92% Television broadcasting New media Outdoor media Other businesses Source:, statistics of the company Television broadcasting New media Outdoor media Other businesses Television broadcasting New media Outdoor media Other businesses The number of new media users, led by Internet, continue to rise in China. The group s revenue growth and composition are in line with the changes in China s media sector. According to statistics from 2006 to 2011, the TV audience expressed as a percentage of the total population remained stable at up to 90%, and the audience of print media like radio and newspaper expressed as a percentage of total population slumped significantly. Although Phoenix Satellite Television owns Phoenix Radio and Phoenix Weekly in the two segments respectively, it does not focus on the two operations. Users of new media, led by Internet, as a percentage of the total population continued to increase, while that of outdoor media remained stable due to its distinctive attribution. Exhibit 5: The number of audience (as a percentage of the total population) of various types of media ( ) 120% 100% 95% 93% 90% 96% 95% 95% 80% 60% 40% 20% 24% 18% 13% 72% 62% 51% 43% 36% 28% 39% 59% 53% Estimated & assumed (gross profit margin & operating profit margin) % & 24.5% % & 25% % & 25% 0% Television Broadcasting Newspaper Magazine Outdoor media Source: CMMS, Internet The group s operating expenses has remained at 12% of total revenue over the past five years, but its gross profit and operating profit have been rising slightly, thanks to the increase in the share that operations with high profit margins, including new media and outdoor media, account for the total revenue of the group. As these two operations are gradually maturing, we estimate the group s gross profit margin and operating profit margin will reach 38% and 25% respectively in the coming three years. Overview 7

8 Exhibit 6: Gross profit margin & operating profit margin Phoenix Satellite TV 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 40.5% 37.6% 38.0% 38.0% 38.0% 32.4% 33.1% 35.2% 21.6% 28.2% 25.2% 24.5% 25.0% 25.0% 21.3% 22.0% 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E Gross profit margin Operating profit margin Source:, statistics of the company Overview 8

9 Catalysts 1 TV broadcasting business: targets high-end audience through premium contents and maintains steady revenue growth 1.1 China s advertising industry sees continued revenue growth China s advertising industry is growing faster than GDP. Leading companies in various media sub-sectors are growing especially rapidly, and are more resilient to periodic changes. China s advertising media mainly include television advertising, Internet advertising, newspaper & magazine advertising and outdoor media advertising, and has maintained steady growth for many years. According to media consulting company CTR, as of 2010, television was still the platform most favoured by corporate advertisers, and television advertising contributed nearly 70% to the total revenue of the advertising industry. However, new media advertising, bolstered by Internet, has also displayed strong growth momentum over the past five years. Leading off-line advertising platforms like buses, metro stations, office buildings, etc., also grew rapidly. Television remains the medium most favoured by corporate advertisers. Television accounts for nearly 70% of total advertising revenue in China. In terms of advertisers, industries like cosmetics, kitchenware & bathroom appliances, transportation, food & beverage, pharmaceuticals, entertainment & leisure, home appliances & retailing and real estate all have contributed to the revenue growth of the advertising industry. Top advertising spenders in China include overseas brands like P & G, L Oreal, Unilever, Parkson Retail Group and Coca Cola. Exhibit 7: Forecast revenue growth of China s advertising industry RMB billion E 2013E 2014E Television advertising Internet advertising Newspaper advertising Source:, public statistics 1.2 Pre-payments received by CCTV from its advertising auctions have increased at a double-digit rate for 11 consecutive years and it rose to a new high in 2012 The hike in CCTV s advertising rates is a good proxy for the advertising charges of local television channels. CCTV received RMB14.26 billion in pre-payments from its auction of advertising slots in 2012, up 12.5% y-o-y. The auction bid price is widely regarded as a benchmark by China s advertising industry. Given the increase in the bid price this year, it will Catalysts 9

10 RMB billion inevitably trigger a round of advertising rate mark-ups among local television stations and Internet & outdoor media platforms. In this year s auction, traditional white-spirit and financial clients such as Moutai, Jian Nan Chun, Bank of China and Pudong Development Bank spent hundreds of millions of renminbi. Besides, e-commerce companies in emerging industries like Alibaba and 360Buy also poured money into acquiring advertising slots in the national television station. Exhibit 8: CCTV s total sales of prime-time advertising auctions and y-o-y growth % 22% 22% 26% 13% -4% % % % 16% 18% 15% 18% 15% % % 30% 20% 10% 0% -10% -20% 2-30% 0-40% Total sales(rmb,billion, LHS) Annual growth rate(rhs) Source:, public statistics 1.3 Phoenix has strong brand equity, contents and celebrity anchors Phoenix has become the Chinese-language media company with the widest reach in the world. The station has premium news content, timely talk shows on current affairs, trenchant viewpoints and professional angles and comments. Phoenix also has a group Celebrity anchors and flagship programmes ensure Phoenix maintain a captive high-end audience base and brand equity. of charismatic anchors, reputation and following among a wide group of Chinese-speaking audience, as well as ever-increasing brand influence. In the 2012 China s 500 Most Valuable Brands released by World Brand Lab, Phoenix ranked No. 45 and No.2 in the traditional media category with a brand equity of RMB27.2 billion. Exhibit 9: Phoenix s star anchors Chen Luyu Sally Wu Olivia Xu Zeng Zimo Ada Lau Vie Tseng Ma Bin Dou Wentao Dong Jiayao Tiger Hu Anthony Yuen Shih Chiping Source:, statistics of the company According to the latest survey conducted by market research firm CTR, three channels under Phoenix were among the top channels with the highest audience satisfaction in Catalysts 10

11 Phoenix Chinese Channel CCTV General CCTV -News Hunan Satellite Phoenix InfoNews Channel CCTV-5 CCTV-3 Phoenix Movies Channel CCTV-10 CCTV-12 China. Phoenix Chinese Channel beat CCTV1 to be No.1 in terms of overall audience satisfaction (Exhibit 11). Exhibit 10: Overall audience satisfaction of different channels 90% 80% 76.8% 73.8% 70% 63.5% 63.3% 62.2% 61.3% 59.4% 54.3% 60% 50% 40% 30% 20% 10% 0% 50.0% 49.2% Source:, CTR 1.4 Channel penetration ratio continues to grow Phoenix Chinese Channel is transmitted by AsiaSat 3 and ChinaSat 6B and covers over 50 countries and regions in Asia Pacific. Phoenix Chinese Channel is transmitted to the national cable networks of many countries and regions around the world. The Phoenix Chinese Channel is beamed to more than 50 countries and regions in Asia Pacific As at December 2010, Phoenix Chinese Channel was accessible to 330 million viewers through cable networks in households and hotels. It is accessible in 75.1% of three-star hotels and in 97.1% five-star hotels. According to a survey, 81% of the respondents who can watch TV in their office choose Phoenix Chinese Channel as the most watched channel. 1.5 Phoenix s programmes are popular and advertisers recognise its media influence According to a survey conducted by research institution CSM TVPRIS, TV series, news /political events and variety shows are the most broadcasted and viewed categories of programmes in China. Except TV series, Phoenix broadcasts classic programmes in various categories including news, talk shows, current affairs, business, military affairs, entertainment and history, of which Behind the Headlines with Wentao, A Date With Luyu, Observation Post of Military Situation, Tiger Talk, News Talk and Asian Journal are long-standing programmes and are better-received by audiences than other similar Chinese shows. Catalysts 11

12 Exhibit 11: Broadcasting time of various programme categories in China as a percentage of total broadcasting time Programme sorts H 2011 TV series News/current affairs Variety Life services Feature Movie Teenager Sports Legal Business Music Drama Teaching Foreign language Others Source:, CSM TVPRIS Many of Phoenix s advertisers are leading companies in their industry Premium programmes and title sponsors of these programmes work together to bring out the best in each other. Phoenix s current advertising clients include a wide range of sectors such as wine, transportation, industrial, finance and pharmaceuticals. Many advertisers are leading companies in their respective industries and are China s top enterprises, such as Moutai, Zoomlion, Bank of China, etc. Phoenix charges premium advertising rates versus the rest of the industry. Exhibit 12: Phoenix s major advertising clients Industry Company Wine Wu Liang Ye Changyu Wine Kweichow Moutai Gujing Distillery Snow Beer Transportation Weichai Power Dongfeng-Nissan Dongfeng Cummins Auman Truck GAC-Toyota Industrial Sanyo XCMG Zoomlion Nanshan Group Mitsubishi Heavy Financial services Sunshine Insurance CMB China Bank of China China CITIC Bank China Ping An Pharmaceuticals Yiling Pharm 999 Group Shineway Pharm Lijun Int l Tasly Pharm Source:, statistics of the company 2 New media business: advertising revenue from web portal continues to grow significantly; video advertising and mobile Internet businesses will become important drivers to boost revenue growth 2.1 The increase in the number of advertisers and the average revenue generated from each advertiser will prompt the growth in revenue from web portals. Its proactive action to lay out new media business will provide it with an important driver for future growth Phoenix New Media (FENG.US) is a subsidiary of Phoenix Satellite Television and was listed as a separate unit in New York in 2011 when it raised US$1.4 billion. It has three major media platforms, namely ifeng.com, v.ifeng.com, and 3g.ifeng.com. Phoenix Satellite Television is the controlling shareholder of Phoenix New Media with a 51.7% stake. Other shareholders include Morningside Ventures, Intel Capital and Bertelsmann Asia Investments, etc. Catalysts 12

13 Internet advertising and paid services for mobile services contributed RMB129 million and RMB110 million respectively to Phoenix New Media s revenue in 1Q 2012, up 71.3% and 14.2% respectively y-o-y. Operating net profit totaled RMB27.19 million in 1Q, versus a net loss of RMB24.24 million over the same period of last year. The share that Internet advertising accounts for the total revenue of Phoenix New Media has further increased, and we expect the shares that advertising and paid services account for the total revenue of the company will be 60% and 40% respectively by the end of Exhibit 13: Growth in Phoenix New Media s Internet advertising revenue outpaces industry average 200, , , , , ,000 80,000 60,000 40,000 20,000 0 RMB ' , , , , , , ,174 75,034 75,230 45,511 49,326 34, Q1 2010Q2 2010Q3 2010Q4 2011Q4 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3E 2012Q4E Internet advertising income Value added service income Source:, company data The number of advertisers of Phoenix New Media was 391, 502 and 558 respectively for 2009, 2010 and 2011, and is on the rise. Top five advertisers are Toyota, TaoBao, China Ping An, ErenEben and YKsuit, which contributed a combined 16.8% to the total advertising revenue of the company in Advertisers expenses are dampened by the sluggish economic environment in 1H Advertising revenue from e-commerce operators declined y-o-y in 1Q 2012, but that from autos and fast moving consumer goods was still robust. We expect the company s full-year advertising revenue growth to be 30%-50%, lower than 70% as forecasted at the beginning of this year, but still higher than other web portals. Given a low base, the company can maintain the growth rate for at least two years. Phoenix New Media s number of advertisers stood at 235 in 1Q2012, and each advertiser spent an average of RMB549,000 in advertising on platforms of the company, still 30% lower than the advertising rate of web portals like Sina and Sohu. The company raised the advertising rate twice in April and October 2011 respectively, and the combined rate increase is nearly 60%. We expect it may continue to raise the advertising rate by a single-digit rate in In the future, Phoenix New Media will focus on gaining adverting clients in the food & beverage companies, financial companies, pharmaceutical companies, local governments and tourist attractions, in a bid to expand its client base. Catalysts 13

14 RMB '000 Household Exhibit 14: The number of advertisers of Phoenix New Media and average revenue per user (ARPU) (unit: RMB 000) Q1 2010Q2 2010Q3 2010Q4 2011Q4 2011Q2 2011Q3 2011Q4 2012Q1 0 ARPA(RMB'000, LHS) The number of advertiser (household,rhs) Source:, statistics of the company According to global website statistical company Alexa, ifeng.com has the 10th highest traffic among all websites in China, topping Youku, 360Buy, Renren and Tmall (Exhibit 16). It has the fifth highest daily watching rate among all portals in China. In addition, it has the third most page views, ranking only after Tencent and Sina. Users spent an average of 10 minutes every day on ifeng.com, only second to the 15 minutes of Tencent. Besides, the number of page views per user of ifeng.com is the largest among all portals in China, reflecting its excellent user engagement and great value as a marketing medium. ifeng.com enjoys a leading position in terms of traffic among all domestic websites, and it s building up its audience base. Meanwhile, v.ifeng.com provides the new media business with momentum for further growth. Exhibit 15: Top 20 websites in terms of traffic in China Rank Website Category Rank Website Category 1 baidu.com Search engine 11 youku.com Video website 2 qq.com portal 12 Tmall.com e-commerce 3 Taobao.com e-commerce 13 soso.com Search engine 4 sina.com.cn Portal 14 chinaz.com Website informer 5 google.com.hk Search engine 15 hao123.com web directory com Portal buy.com e-commerce 7 weibo.com Social network 17 tudou.com Video website 8 sohu.com Portal 18 alipay.com e-payment 9 google.com Search engine 19 renren.com Social network 10 ifeng.com Portal 20 douban.com Social network Source:, Alexa 2.2 Phoenix is likely to benefit from the continuous growth of China s online video advertising market As the new media sector springs up, advertising business is slowly shifting from traditional mediums like television, newspaper and radio to Internet, especially video websites. China s Internet advertising revenue grows by an average of 30% to 40% a year, while its online video advertising revenue grew by nearly 100% in recent years. Online video advertising revenue in China grew by nearly 100% in recent years. We expect China s video sector will post a y-o-y revenue growth of 100% in 2012, mainly contributed by advertising revenue. Catalysts 14

15 RMB billion According to information supplier Analysys International, in 4Q 2011, v.ifeng.com ranked eighth in terms of advertising revenue among all video websites in China, and its advertising revenue contributes 5% to the total advertising revenue of ifeng.com. Based on the content and brand value of Phoenix, v.ifeng.com still enjoys room for further revenue growth. Exhibit 16: Annual revenue of China s video advertising market and y-o-y growth % % % % % 140% 120% 100% 80% 60% 40% 20% e 2013e 2014e Annual income of domestic video advertising market(rmb billion, LHS) Y-o-Y growth (RHS) 0% Source:, statistics of the company Phoenix enjoy higher sustainability and profitability than rival youku.com As compared with video-only websites like youku.com and tudou.com, Phoenix New Media features superior content resources and short video resources like news, information and interviews exclusively provided by Phoenix Satellite Television, which are low-cost and take up little bandwidth. Therefore, in the cost comparison with youku.com for five straight quarters, both websites enjoyed rapid revenue growth, but Phoenix New Media had relatively fixed costs for bandwidth and content, and enjoyed higher sustainability and profitability than youku.com. Exhibit 17: Cost comparison between Phoenix New Media and youku.com RMB million Phoenix New Media Youku Phoenix New Media Youku Bandwidth cost Content cost Source:, statistics of the company 2.3 Revenue from mobile Internet will grow significantly Phoenix New Media s mobile Internet products now include 3g.ifeng.com, 3g.ifeng.com Client and GoTone Phoenix Mobile Newspaper. These mobile platforms provided a full coverage of the London Olympics. During the London Olympics, 3g.ifeng.com saw its Catalysts 15

16 Revenue contribution from mobile Internet advertising remains small but has the potential to be a significant growth driver for Phoenix. daily pageviews peak at 5.7 million. Phoenix New Media s advertising revenue from wireless clients is expected to reach RMB40 million, which may be a small share of the company s total revenue forecast of RMB1.2 billion for the full year, but will act as a significant growth engine for the future. 3 Outdoor media business: scrambles for resources to boost revenue 3.1 Phoenix has completed the preliminary rollout of its LED display network in tier-1 cities and it is expanding to more cities Phoenix Metropolis Media was established in June Later it was approved to operate in the mainland, and it started to establish itself as an outdoor media operator based on LED displays. It installs LED displays mainly along busy roads or around CBDs and city squares, where numerous business, financial and cultural premises, hotels and service centres are located and where traffic flow is heavy and dense. Phoenix Metropolis Media has 49 LED advertising displays in the major Chinese cities such as Beijing, Shanghai and Guangzhou. Exhibit 18: Phoenix Metropolis Media is rolling out its outdoor media network in major cities Source:, statistics of the company In less than four years, Phoenix Metropolis Media has set up 49 LED advertising displays in major cities in China, including Beijing, Shanghai, Chongqing, Guangzhou, Nanjing, Hangzhou, Chengdu, Shenzhen, Suzhou, Wuxi, Changzhou and Ningbo. Catalysts 16

17 Phoenix Metropolis Media has acquired advertising resources in major areas of key cities in China, and it is still expanding its advertising resources. Exhibit 19: Phoenix Metropolis Media has rolled out is outdoor media network in major cities in China Shenyang Beijing Dalian Qingdao Chengdu Chongqing Zhenzhou Nanjing Wuxi Wuhan Shanghai Shuzhou Hangzhou Guangzhou Shenzhen Source:, statistics of the company According to Analysys International s research, the size of China s outdoor LED display advertising market increased by 35.5% y-o-y to RMB1.22 billion in In terms of revenue, Tulip Mega Media and Phoenix Metropolis Media each make up 1/3 of China s outdoor LED display advertising market and tied for the first place, followed by Advision Media. 3.2 Phoenix Metropolis Media has distinct advantages over competitors Phoenix Metropolis Media can generate higher revenue than competitors as it has more LED displays in the major cities like Beijing and Shanghai than its two major competitors Tulip Mega Media and Advision Media. Phoenix Metropolis Media s major competitors in China s outdoor LED display advertising market are Tulip Mega Media and Advision Media. These three companies own 49, 49 and 55 LED displays respectively in China, but Phoenix Metropolis Media has more LED displays in Beijing, Shanghai, Guangzhou and Shenzhen than the latter two companies, and thus enjoys higher value of advertising as tier-1 cities are densely populated and consumers purchasing power is higher. For instance, advertising revenue from one of Phoenix Metropolis Media s LED display near Wangfujing in Beijing has exceeded RMB60 million per annum. Catalysts 17

18 Exhibit 20: The no. of outdoor LED displays in China of major operators Phoenix Metropolis Media Advision Media Tulip Mega Media Beijing Shanghai Guangzhou Shenzhen Tier-1 cities Tier-2 and 3 cities Total Source:, statistics of the company Operators need to obtain approval from several regulators to install and operate large outdoor LED displays in China. As Phoenix Metropolis Media is backed by Phoenix Satellite Television, it enjoys advantages over other private operators when seeking approval from related regulators. The costs for renting premises and maintenance of large LED displays are far higher than those of regular large print advertising billboards. Phoenix Satellite Television, which has HK$1.5 billion in capital, should help guarantee the normal operations of Phoenix Metropolis Media. In addition, Phoenix Metropolis Media has already commissioned a sponsor to submit applications to the CSRC for pre-listing preparations. We expect Phoenix Metropolis Media to take a leading position in the LED outdoor media market in China by 2014, and its number of LED displays to increase to over 70 from 49 currently. The company s revenue is forecasted to increase to HK$700 million by 2014 from HK$387 million in 2011, and account for 12.8% of Phoenix Satellite Television s total revenue, up from 10.6% currently. The average annual revenue growth rate will be about 20%, mainly boosted by the increase in the number of LED displays and the advertising rate of high-quality advertising resources in tier-1 cities, including Beijing, Shanghai, Guangzhou and Shenzhen. Catalysts 18

19 Forecasts & Valuation 1 Profit forecasts 1.1 Base-case forecasts. We forecast Phoenix s operating revenue to reach HK$4.23 billion, HK$5.08 billion and HK$6.05 billion respectively over We forecast its operating profit to be HK$1.08 billion, HK$1.4 billion and HK1.66 billion, and a net profit of HK$710 million, HK$910 million and HK$1.09 billion respectively over Earnings forecasts Item 2012E 2013E 2014E Revenue (HK$ bn) y-o-y growth (%) Operating profit (HK$ bn) y-o-y growth (%) Profit attributable to owners of the company (HK$ bn) y-o-y growth (%) n/a EPS (HK$) Source: 1.2 Valuation screening We use PE as our primary method for valuing Phoenix. The current stock price implies a forecast PE of 15.3x and 11.9x for respectively, which are above the valuation of Hong Kong-listed peers. However, given Phoenix s brand value and the growth potential of its new media and outdoor media businesses, we believe the slight valuation premium to Television Broadcasts (0511.HK), which focuses on the local television business in Hong Kong, is reasonable. We assume a PE of 16x for 2013 with a net profit CAGR of over 20% during The investment rating of the company is Buy with a TP of HK$2.88, for 16x 2013 expected EPS of HK$0.18. Company 2011A 2012E 2013E Television Broadcasts (0511.HK) Mei Ah Entertainment Group (0391.HK) 18 n/a n/a Clear Media (0100.HK) Average Source: Wind, Catalysts 19

20 2 Risks Although advertising revenue growth of China s media sector has outpaced GDP growth over the past several years, we should be cautious of the risk that China s economic growth rate would continue to be weak. Under such a scenario, advertising revenue growth would stall or even decline. Phoenix s viewership numbers may not be increased, or it may even shrink. Phoenix New Media may report slower-than-expected growth. Its advertising slots are not lucrative and as keenly sought after as expected. Its video business develops at a slower than expected pace. As such, the company s revenue growth may plunge. The company fails to reduce the high cost of operating outdoor LED displays and boost revenue growth. Phoenix Metropolis Media may install fewer LED displays in China s major cities as expected, leading to stagnant revenue growth. 3 Closing notes to the buy-side analyst Although China s advertising industry has grown remarkably after many years of development, most businesses with well-recognised brands are still relatively new but offer tremendous room for growth, compared to international media companies with operations spanning various media segments and regions. In the future, the cultural and media sector will benefit from the rise in income in China and serve as an important contributor to GDP growth. Investors should take into consideration the company s brand value in China and the viewership it has amassed. We believe Phoenix will enjoy sustained growth in TV broadcasting revenue in the future on the strength of increased TV ad rates. The group s revenue growth will slightly outpace the industry average. Phoenix New Media s revenue growth for 2012 may be weaker than that for 2011, as the economic slowdown has prompted advertisers to reduce spending on ifeng.com and v.ifeng.com. However, conditions will gradually improve as the economy recovers. ifeng.com enjoys a leading position in terms of the time spent by an average browser and the number of page views among all major Chinese websites. ifeng.com has excellent growth potential for advertising revenue due to its low base. v.ifeng.com is likely to become an important driver to boost Phoenix New Media s revenue growth. We are sanguine about Phoenix Metropolis Media s prospects in China s outdoor media market, especially its development in the LED large-screen advertising segment. We believe the company has an advantage over its two competitors, Tulip Mega Media and Phoenix Metropolis Media, in terms of brand value, resources and the ability to obtain the agency of premium advertising slots. Besides, it has considerably more cash reserves than the latter. Therefore, Phoenix Metropolis Media is likely to become the leader in the LED large-screen advertising segment, just as dominant as Focus Media is in the office elevator advertising segment. Catalysts 20

21 In summary, Phoenix enjoys tremendous growth potential as its television broadcasting, new media and outdoor media businesses are growing in tandem. The stock is suitable for both aggressive and defensive investing strategies. It is advisable to keep an eye on this stock as it offers good long-term investment potential. Appendix I: Income statement As of December (Unit: HK$ mn) 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E Note Total revenue 1,181 1,392 1,531 2,566 3,643 4,227 5,083 6,049 Revenue will grow at an average annual rate of 18% in the coming three years Operating costs ,527 2,273 2,620 3,050 3,629 Gross profit ,039 1,370 1,606 2,033 2,420 Its gross profit margin will rise slightly to 40% in the coming three years Selling and administrative expenses Profit from continuing operations ,078 1,398 1,663 The profit margin of continuing operations is about 28% Other (expenses) / income Profit before tax ,178 1,518 1,813 Income tax expense It is assumed that the effective tax rate is 20% Profit attributable to non-controlling interests Profit attributable to owners of the Company (Losses)/earnings attributable to the owners of the Company ,214 1, ,088 Earnings per share (HK$) (0.02) Dividend per share (HK$) The dividend payout ratio is 35% Shares outstanding (m) 4,942 4,942 4,954 4,986 4,991 4,991 4,991 4,991 Revenue growth rate 11.4% 17.9% 9.9% 67.7% 42.0% 16.0% 20.3% 19.0% EBITDA ,078 1,398 1,663 Corporate value 12,167 12,453 12,504 12,354 12,550 11,749 11,738 11,393 Source: company information, Catalysts 21

22 Appendix II: Balance sheet 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E Note Other non-current assets ,633 The expansion in non-current assets is mainly due to the increase of office properties and equipment Non-current assets 460 1,038 1,292 1,620 2,223 2,510 2, Accounts receivable Prepayments and other receivables Bank deposits and restricted cash , ,228 Cash and cash equivalents ,313 1,545 2,402 2, Accounts receivable/revenue = 15% Other Current Assets Assuming prepayments don t increase any more Current assets 1,176 1,073 1,425 2,206 3,964 3,956 4,686 0 Total assets 1,636 2,111 2,717 3,826 6,187 6,466 7,533 3,632 Long-term borrowings Including inventories, amounts due from related companies, Self-produced programmes, purchased programmes and film rights. Investment deposits ,549 Other long-term liabilities ,778 Deferred income tax liabilities Non-current liabilities Accounts payable Short-term liabilities Deferred income Income tax payable Accounts payable/revenue = 15% Other current liabilities Current liabilities , Total liabilities ,370 1, , Equity attributable to owners of the Company 1,385 1,606 1,831 2,207 3,565 4,122 4,489 2 Equity attributable to minority interests ,318 1,374 1,924 1,144 Total equity 1,409 1,830 2,059 2,457 4,881 5,495 6,413 1,284 NAVPS (HK$) ,245 Shares outstanding (m) 4,942 4,942 4,954 4,986 4,991 4,991 4,991 2,248 It is assumed that the listing of the outdoor media business as a spin-off unit will increase equity of minority interests in 2013 capital employed 1,409 1,830 2,302 3,110 5,359 5,495 6,413 7,493 Cash after deducting liabilities ,067 2,402 2, Source: company information, Catalysts 22

23 Appendix: Cash flow statement 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E Note Net profit ,088 Depreciation & Amortization Movement in other operating assets Movement in working capital Other operating cash flow Total operating cash flow ,165 1,385 Fixed-asset investment Assuming capital expenditure will increase slightly year by year in the future after the construction of the Phoenix Satellite Television centre in Beijing is finished in recent years Other investments Total cash flow from investing activities Dividend Assuming dividend payout ratio stays at 35% in the coming three years Movement in liabilities The company s net cash and deposits exceed HK$2 billion, and we assume no borrowings in the future for financing Net income from selling (buying) interests Cash flow from other financing activities , Assuming deposits and restricted cash maintained at HK$1 billion in the future Total cash flow from financing activities , Movement in cash Total cash at the beginning of ,312 1,545 2,402 2,963 Exchange gains/losses Total cash by year end ,312 1,545 2,402 2,963 3,632 Free cash flow (operating cash flow minus capital expenditure ,035 Free cash flow / the number of shares (0.00) (0.03) (0.18) Shares outstanding 4,942 4,942 4,954 4,986 4,991 4,991 4,991 4,991 Share price (as at August 16, 2012) Market cap(hk$ mn) 10,830 10,830 10,830 10,830 10,830 10,830 10,830 10,830 Source: company information, Appendix: Ratio analysis Valuation ratios 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E P/E ratio EV/EBIT P/S ratio P/B ratio Payout ratio 0.9% 0.9% 0.9% 1.5% 3.7% 2.3% 2.9% 3.5% Profitability ratios 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E Gross margin 32.4% 33.1% 35.2% 40.5% 37.6% 38.0% 40.0% 40.0% Operating profit ratio 21.6% 21.3% 22.0% 28.2% 25.2% 25.5% 27.5% 27.5% Net profit margin 24.3% 20.2% 20.6% 18.2% -2.1% 16.7% 17.9% 18.0% ROA 17.5% 13.3% 11.6% 12.2% -1.2% 10.9% 12.1% 12.4% Return on equity 20.3% 15.3% 15.3% 19.0% -1.6% 12.9% 14.2% 14.5% Leverage & coverage ratio 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E Liquidity Acid-test ratio Total liabilities/capital Total liabilities/equity Others 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E Asset turnover Accounts receivable turnover Accounts payable turnover Effective tax rate 15.0% 16.5% 19.7% 19.6% 143.4% 20.0% 20.0% 20.0% Source: company information, Catalysts 23