The following is a summary of the report:

Revenues were mostly in line with expectations: Focus’s first-quarter revenue reached US$125 million, up 19% year-on-year (down 13% QoQ) and 5% higher than our expectations. On a non-GAAP basis, ADS earnings per share were $0.16, up 11% year over year, largely in line with our expectations.

Positive factors: 1) Commercial building network revenue increased by 46% year-on-year, reaching 40% of total revenue; 2) Online advertising revenue increased by 32% year-on-year, reaching 23% of total revenue; 3) Due to the increase in advertising demand and With the recovery of pricing power, Focus has made an optimistic forecast for the second quarter. The total revenue of commercial building network, store terminal network and frame advertising network may increase by 20-23% month-on-month and 10-13% year-on-year. It is worth noting that Focus is expected to raise advertising prices again in July.

Negative factors: 1) The revenue of the framework advertising network (accounting for 20% of the total revenue) increased by only 5% year-on-year; 2) The operating cash flow decreased by 92% month-on-month, mainly due to: prepayment of the rent of the store terminal network, payment of the 2009 No. Fourth quarter income tax, settlement of a commercial arbitration case in 2008 and seasonal decrease in revenue.

Benefit from the rebound of the advertising business: We calculate the value of Focus stock at $24.5 through the discounted cash flow (DCF) method, indicating that the stock has a 62% upside potential. We believe Focus will benefit from the recovery of China's advertising business as: 1) Baidu expects revenue to grow by about 70% yoy in 2Q; 2) AirMedia expects 2010 revenue to grow 50-65% yoy; 3) Sina Both Sohu and Sohu expect an increase in advertising revenue. Our analysis believes that: 1) Focus's total revenue may increase by about 20% year-on-year this year, while total revenue in 2009 fell by 21% year-on-year; 2) Focus' non-GAAP operating profit margin in 2010 will increase by 10% year-on-year to 30% %, mainly due to operating leverage; 3) We believe Focus' expansion into third- and fourth-tier cities will bring more advertising revenue to it due to local economic growth and increased disposable income; 4) Net cash and Focus The replacement cost of outdoor advertising is about 35-40% of its market value.

Stock Rating: Overweight

Industry prospects: attractive

Actual EPS by ModelWare Model: (Dec 2009) $1.61

Expected EPS by ModelWare Model: (Dec 2010) $0.40; (Dec 2011) $1.17; (Dec 2012) $1.27