Morgan Stanley Opens 30-Day Research Tactical Idea on Focus Media

Morgan Stanley has opened a research tactical idea on Focus Media FMCN staying that the share price is expected to rise over the next 30 days. In the report, Morgan Stanley writes, "This is because the stock has traded off recently, making short term valuation much more compelling. We consider Focus Media undervalued. Notably, 1) Focus Media's 1Q ad sales growth outpaced the levels of peers (up 36% YoY vs. up 7-9% YoY for Sina and Sohu. 2) It raised its effective ad price by 10% in January and said it may hike its ad price again in key cities in July. 3) The stock trades at an attractive 11x our 2012e earnings, with a 2% dividend yield and "option" value offered by its interactive ad service. 4) Focus's current share price implies a rather bearish scenario, with its non-GAAP earnings growing 0-5% p.a. for the next three years (vs. up 60%+ last year and our base-case earnings forecast of ~25% p.a. over the next three years)." Morgan Stanley maintains its Overweight rating on Focus Media, which closed Friday at $21.38.