Firm believes Focus stock has been weak despite strong fundamentals because of fear of Target Media and Carlyle selling their shares after 50% or ~3.9 mn of the ADSs unlocked on September 13, 2006. They view this placement as a positive for Focus in easing shares sale overhang. Post this placement; firm does not expect any more blocks available for sale at least until January 7, 2007.
They believe Focus' valuation is very attractive at this level relative to its fundamentals. Focus is trading at 20X 2007 non-GAAP diluted EPADS and 15X 2008, growing non-GAAP EPADS 150% in 2006, and 60% in 2007; at 3.7X 2007E book versus 16% ROE, or 7.5X 2007E tangible book versus 34% return on tangible equity. Firm has a Conviction Buy rating on Focus with a 12-month price target of US$78 based on 28X 2007 non-GAAP diluted EPADS.
Notablecalls: Expect the filing create some buy interest in the name.