China MediaExpress Holdings (NASDAQ:CCME): Due diligence supports Buy - Bounce?

I'm sure most of the trading community is familiar with a Chinese advertising co called China MediaExpress Holdings (NASDAQ:CCME). The company has been under attack by several short-sellers recently, causing a 10 pt drop in its share price over the past 2-3 weeks. Short-sellers have claimed the company to have overstated its revenues, among other things.

- This morning a small outfit called Global Hunter is out with a rather strong defense of CCME. Firm notes they were in China last week to conduct additional due diligence on the co.

Here are the details:

We visited CCME’s headquarters again, and reviewed all of its contracts with advertising clients and bus operators, tax filings, and bank statements for the last three years. We called or met 16 top advertisers, who verified a total of approximately $105MM of revenue or ~50% of our estimated 2010 revenue. We called China Telecom, and the exclusive advertising agents for Coca Cola and L'Oreal, who confirmed they have placed ads on CCME's platform. We also spoke to 17 bus operators, who confirmed that they have signed in aggregate 14,191 buses with CCME, or 52% of the total number of buses CCME reported.


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(requested by Global Hunter Securities LLC)


Reiterate Buy. Our due diligence work further reinforced our thesis. We continue to believe CCME is a leader in the intercity bus advertising market with a unique business model and large growth potential. We reiterate our Buy rating and $26 price target.

Notablecalls: It certainly looks like the people at Global Hunter have done some work on CCME. Could we be in for a bounce, considering:

- The stock has pretty much been cut in half recently. From $22 to $12.

- Short interest stands at 50%.

- My guess is, CCME has become a bit of a retail short play. Not your usual tough-as-nails type of short sellers who stick around.

- I watched shorts get killed in a certain Chinese 'fraud' name yesterday. Made me say hmmm..

All in all, I think CCME warrants some attention in the n-t. This one could squeeze hard, once it does.