Matthew Sweeney of Laughing Water Capital presented his in-depth investment thesis on Clear Media (Hong Kong: 100) at Best Ideas 2020.

Thesis summary:

Clear Media is the dominant player in Chinese bus shelter advertising, with ~70% share in the most important markets. While this is not a sexy business, out of home (OOH) advertising is of increasing importance, as unlike television or mobile advertising, consumers cannot opt out of the experience, and the data shows that an OOH presence significantly improves the efficacy of mobile advertising. The company’s scale gives it important competitive advantages, and combined with the ten-year contracts that are typical in this space, the company’s competitive position is strong.

As China is still in the early innings of a growing middle class and increased consumer spending, Clear Media should benefit from secular tailwinds for decades to come. However, over the last year Clear Media has suffered from temporary problems as the Chinese economy has dealt with the effects of the U.S. trade war and other problems. Simply assuming a return to “normal” at some point in the next 3-5 years suggests more than 100% upside for shares, but given that Chinese ad spending will benefit from the 2022 Beijing Winter Olympics, significant additional upside is possible. ~50% owner Clear Channel Outdoors (CCO) has announced it is considering a sale of the business, which could pull forward returns to the near term.

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About the instructor:

Matthew Sweeney is the Founder and Managing Partner of Laughing Water Capital. The firm employs a concentrated equity strategy while focusing on companies that are dealing with some sort of structural or operational difficulty that is judged to be easily solved by an incentivized management team if given enough time. Matt began his career at Cantor Fitzgerald where he focused on equity idea generation for institutional clients. He received a Bachelor of Arts degree in History from the College of the Holy Cross, and a Masters degree in International Relations focused on the Middle East and Terrorism from Seton Hall University. Matt is a Chartered Financial Analyst (CFA), and former Vice Chair of the New York Society of Security Analysts (NYSSA) Value Investing Committee.