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Author: metoo105 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8  
Subject: Re: My take Date: 5/19/2008 1:04 PM
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Since the last poster's comment, this stock fell all the way to a low of $2/ADR share. This company now trades for about $3.7/ADR share. They guided higher during the last CC, and I am interested in now opening a position.

Yucaipa, Burkle's investment vehicle, has taken two bites at this apple. The first, most recently, with some preferred shares that convert at $6/ADR share.

XFML is a Chinese Finance media conglomerate that distributes and creates contents on TV, radio, newspapers, magazines, and online. They also have a division that works in advertising. Their focus is on the high net worth Chinese, which is where, one assumes, most overseas companies focus their investment dollar.

Although a lot has been made of which Chinese company will become the next Google, still 90% of the advertising dollars are spent on traditional media sources there.

During the smear that occurred last fall, many stories were run along the lines of: "can you believe it, they are not even Xinhua, the State Run Chinese media company." If you are fan of a good display of market manipulation, this has been a good one.

It contained all of the hallmarks of a good misdirect:
1. Female CEO
2. Misunderstood company
3. In an overheating sector (Chinese Small Caps)
4. Associational dirt (former BOD member who was not to the manor born)
5. A fairly obvious anticipation that a successful IPO will give access to equity that can be used *and again* to purchase assets, which they believe are trading below value.

But now, the company is on the other side of the pendulum, I wonder whether the last month's rise in short interest should signal that all of this excess selling is done and overdone.

But the bull case:
1. Trailing PE of 10; it's cheap.
2. A passing overhang from the costs of incorporating the new businesses and assets into the fold. Earnings growth from ongoing operations going forward will improve from the removal of these growing pains alone.
3. The confidence inspired by Burkle's continued involvement. (Make your due diligence a touch less demanding knowing that he's scrutinized their books already.)
4. The fomenting campaign has actually probably helped from an operations perspective since it has undoubtedly been sobering influence on management's execution.
5. No debt!!!
6. Fantastic sector of the global economy, probably the best media sector to be in in China.

To correct a misunderstanding in one of the comments posted above, XFML's participation in the Olympics will be minimal to none.
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