UK-listed RedHot Media plans to finance the acquisition of an outdoor advertising company in China with new shares and internal cash

REDHOT Media International Ltd (RHM), a Malaysia-based integrated media company that is listed in the UK, hopes to buy an outdoor advertising company in China by the end of next year as that country's advertising revenue pie is growing.

"We are currently exploring, just chit-chatting. We have not begun negotiations yet," group managing director Cheong Chia Chieh told Business Times in Petaling Jaya yesterday.

The company, listed on the London Stock Exchange's Alternative Investment Market in September, plans to finance the acquisition with new shares and internal cash.

RHM, about 80 per cent owned by Malaysian investors and institutions, sees great potential in China's media industry.

ZenithOptimedia anticipates advertising expenditure in China to grow by more than 60 per cent to US$26.24 billion (RM96 billion) in 2010 from US$16.05 billion (RM58 billion) last year.

"What's more interesting is that advertisers in China are more willing to try non-conventional media (as in other than television, newspaper, radio and magazine)," Cheong said.

Advertising income from non-traditional media accounted for 60 per cent of the total national advertising income in 2006.

RHM has been on an aggressive shopping spree of late. Just this month alone, it bought 60 per cent of AllChina Group's business and 70 per cent of Ausscar Group Sdn Bhd.

AllChina Group operates www.AllChina.cn, an e-trade Web portal for advertisers, media and advertising agencies. Ausscar has the licence to offer insurance services in the country.

Cheong believes the AllChina acquisition will help RHM make bigger inroads into China.

Last year, China contributed about 10 per cent of the company's total revenue. Now, half of its sales comes from China.

"The potential in China is huge. I won't be surprised if sales contribution from China reaches 70-80 per cent in two years."

RHM's net profit jumped 37 per cent to RM2.3 million, while revenue surged 49 per cent to RM19.3 million last year.

RHM believes that its unconventional business model will be the key to withstanding the current economic slowdown.

"We believe we are the solution for advertisers during the bad economy. Companies are switching their budget for branding to very targeted, action-driven marketing. That's where we can play a key role," Cheong said.