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In China, Focus on Focus Media

As the No. 1 advertising company in China's fast-growing Internet, mobile, and poster/panel markets, Focus Media Holding (FMCN) will benefit greatly from the 2008 Summer Olympics. Right now, Focus' sales and profits are expanding at more than 50% annually. "We are confident Focus can keep growing that fast for the next two years at least," says Tian X. Hou of Pali Capital, which owns shares. She says its dominance in "out-of-home" advertising, including ads in elevators, supermarkets, and cell phones, has let Focus raise prices and expand rapidly, particularly in Web advertising. Shares of Focus doubled, from 33 at the end of 2006 to 66 this Nov. 6. Now at 57.48, the stock should hit 100 in 12 months, says Hou. That's about 35 times her 2009 earnings forecast of $2.83 a share. Focus' peers trade at a price-earnings ratio of 35. Hou's forecast for 2008 earnings is $2.06 a share, up from $1.51 in 2007. Focus earned 91 cents a share in 2006.

Part of its fast growth is due to acquisitions, and this "has allowed Focus to cast a wide net to control various ad markets," says Hou. Jason Brueschke of Citigroup (C), which has done banking for Focus, rates the stock a buy. He says the company's diversified platform of new media networks is well positioned to take advantage of China's exploding market. Focus, he adds, effectively has a monopoly in certain ad segments in China.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

RSC Is Ready to Rebuild

The imbroglio between United Rentals (URI) and Cerberus Capital Management, with Cerberus trying to cancel its bid for United, is boosting RSC Holdings (RRR), a small rival in the rental of heavy-construction and industrial gear. "We are gaining share while United is distracted," says RSC's CEO Erik Olsson. RSC has 5% of the market, up from 3%-4% last year. Nearly all RSC's work is nonresidential, but the subprime crisis battered its stock, down from 22 in July to 12.27 on Dec. 12. David Blaustein of UBS (UBS) upgraded RSC from neutral to buy on Dec. 10 to reflect, he says, the opportunity afforded by the drop. RSC could generate substantial cash flow in 2008-09, he adds. Joel Tiss of Lehman Brothers (LEH), who rates RSC overweight, sees it earning $1.46 a share in 2007 and $1.83 in 2008, up from $1.21 in 2006.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Getting Pumped at Abiomed

Not many stocks have recovered from the drop following the subprime mess, but Abiomed (ABMD) has bounced back nearly to its 52-week high of 15. Abiomed makes sophisticated pumps that temporarily help the heart function after a serious cardiac injury, such as a heart attack. The stock has ramped up from 10 in August to 14.53 on Dec. 12 on buzz that the Food & Drug Administration within 12 months could approve Abiomed's chief product, called Impella. It's a miniature pump at the end of a catheter, designed to be inserted into the heart though blood vessels. By bolstering the heart's pumping power, the Impella helps it recover. Erick Schneider of UBS expects an FDA approval will drive up Abiomed's value. Amy Stevens of Susquehanna Financial Group, who has a "positive" rating, says Abiomed stock is worth as much as 19.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.


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