Focus Media Holding Limited (Focus Media) reported higher-than-expected operating and net losses, as better-than-expected revenues were offset by higher-than-anticipated operating expenses. On a yo- y basis, revenues and earnings deteriorated significantly as the company failed to sign sufficient online ad contracts. Given the current price levels and disappointing 2Q 09 revenue guidance we maintain our HOLD rating on the ADR fundamental stock....

The impact of an economic slowdown have been felt on advertising budgets with corporations tightening spend due to reduced consumer demand and media companies lowering guidance. The growth rate of the Chinese advertising industry in FY 2009 is expected in mid-single digits (5.4%), down from high double digit growth reported in the past years (18.8% in 2008)....

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On 22 December 2008, Focus Media Holding Limited (FMCN) signed a definitive agreement with Sina Corporation (Sina), China’s leading internet news portal, to sell all of its digital out-of-home advertising network for more than US$1 bn. We view FMCN’s decision to sell its non-internet advertising divisions to Sina as a surprising move. Given current price levels, we maintain FMCN’s ADR a HOLD. Although we expect a significant positive currency…