Review of Operations

The following discussion and analysis of the financial performance of the Group should be read in conjunction with the proforma consolidated financial information and the related notes included in Section 13 of Asia Media’s Prospectus dated 22 December 2010 and our 3rd Quarter unaudited results for the period ended 30 Sept 2010. This discussion contains forward-looking statements that involve risks and uncertainties.

Revenue

Our Group currently provides 3 types of services to our customers – air-time sales, programme sponsorship; and creative and productive works.

As such, we generate revenue from the above services in the following manner:

(a)	Sales of advertising time in between programmes on our Transit-TV Network System;
(b)	Sales of programme sponsorship to anchor advertisers which provide an opportunity for the anchor advertisers to leverage on our Transit-TV Network System to gain more publicity with a longer duration of commercial time. In addition, the anchor advertisers are able to participate in activities such as viewers’ choice/voting and prize winning contest; and
(c)	Sales of creative and productive works, which provide a one-stop solution service to the advertisers for works such as creative design, video shooting, 2-dimension and 3-dimension animation with the assistance from external production houses from time to time. As such, a major portion of the revenue received from the sales of creative and production works will be paid to external production houses for their services.

Our advertising customers normally subscribe to items (a) to (c) whilst the anchor advertisers subscribe to items (a), (b) and (c) as a package.

Our revenue is recorded net of any sales discounts from our official list prices that we may provide to our advertising customers. These discounts include volume discounts and other customer incentives offered to our advertising customers, including additional broadcast time for their advertisements if have unused time available. Sales discounts are usually provided to long term advertising customers or those who had huge purchases from us in order for us to maintain a good working relationship with these customers. Our advertising customers include advertisers that directly engage in advertisement placements with us and advertising agencies retained by some advertisers to place advertisement on their behalf.

We do not experience any material seasonality in our business, as our business operations are relatively stable throughout the year. However, we may experience a higher turnover towards the end of each calendar year due to a higher demand for our services during Christmas and school holidays which take place towards the end of the year.

Despite the global economic downturn in 2008, our revenue has been growing on a year-on-year basis due to increasing interest in DOOH transit media from our existing and new customers during the periods of review. The DOOH transit media industry also demonstrated a strong growth rate of 128.6% in 2008 and 61.5% in 2009, charting a CAGR of 92.1% from 2007 to 2009.

The key factors that affect our revenue include:

(a)	Actual price of advertising air time.
(b)	The quality and attractive contents and programmes.
(c)	Mixture ratio of contents/programmes to advertisements.
(d)	Advertising time.

Cost of Sales, Gross Profit and Gross Profit (“GP”) Margin

Our cost of sales mainly consists of production costs of engaging external production houses to assist our creative department and content costs such as purchasing movies or music videos, sports and news.

The main factors that affect our costs of sales include the underestimation of production costs and a change in riders’ content preferences.

9-month period ended 30 September 2010

The Group recorded a revenue of approximately RM16.4 million based on the proforma 9-month period ended 30 September 2010 with the assumption that the Group had been in existence since Jan 2010. However, based on actual performance, the Group recorded a revenue of approximately RM9.6 million which were mainly contributed by Asia Media Sdn Bhd and Transnet Express Sdn Bhd subsequent to the completion of the acquisitions of the same by the Company on 3 May 2010, which took into account revenue from May to September 2010.

The Group GP margin increased by 3.6% from 45.32% in the proforma 9-month period ended 30 September 2009 to 48.92% in the proforma 9-month period ended 30 September 2010. The increase in the GP margin was mainly due to competitive production costs provided by the external production houses.

FYE 31 December 2009 vs FYE 31 December 2008

Our revenue increased by approximately 101.29% from FYE 31 December 2008 to FYE 31 December 2009 mainly due to the increased marketing efforts to promote our network by our sales team and the addition of 2 commissioned agents – Zenith Media Sdn Bhd and Starcom Mediavest Group Sdn Bhd. Our marketing strategies include enticing new customers to sign up for a longer period by providing additional free air time. Our winning of several awards such as “Best Start-Up Company”, “Largest Transit-TV Network (Bus)”; and “SME Rising Star Award” had also improved our reputation in the DOOH transit media industry, and hence increased our revenue. The completion of our installation of Transit-TV Network System in an additional 250 buses in late 2008 also contributed to the revenue growth in FYE 31 December 2009.

Our GP margin decreased by 6.29% from 58.63% in FYE 2008 to 52.34% in FYE 2009 as a result of lower fees charged to some of our loyal customers. The decrease was also a result of the purchase of contents from third parties instead of in-house production which resulted in higher cost of sales.

3-month period ended 31 December 2007

We commenced business operations in October 2007 and recorded a revenue of RM3.5 million for the 3-month period ended 31 December 2007. This was mainly contributed by the purchases from two (2) media agencies whereby we provided them with a new advertising mode with DOOH transit media for their customers and in return, they placed their customers’ advertisements with us in large quantity.

We recorded a GP margin of approximately 51.19% for the 3-month period ended 31 December 2007 as most of the contents for programmes sponsorship were produced in-house.

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