The following is a summary of the report:

Revenue was mostly in line with expectations: focus reported $125m in revenue in the first quarter, up 19 per cent year-on-year (down 13 per cent month-on-month) and 5 per cent above our expectations.Based on non-gaap, adrs earned 16 cents per share, up 11 per cent from a year earlier and roughly in line with our expectations.

Positive factors: 1) the revenue of commercial building network increased by 46% year on year, reaching 40% of the total revenue;2) online advertising revenue increased by 32% year-on-year, reaching 23% of the total revenue;3) due to the growth of advertising demand and the recovery of pricing power, focus media made an optimistic forecast for the second quarter. The total revenue of commercial building network, terminal network and frame advertising network may increase by 20-23% month-on-month and 10-13% year-on-year.Notably, focus media is expected to raise AD prices again in July.

Negative factors: 1) framework advertising network revenue (accounting for 20% of the total revenue) increased by only 5% year on year;2) operating cash flow decreased by 92% month-on-month, mainly due to prepayment of rent for the terminal network of the store, payment of income tax in the fourth quarter of 2009, settlement of a commercial arbitration case in 2008 and seasonal reduction of income.

Thanks to a rebound in advertising: our cash flow discounted valuation gives us a focus share value of $24.50, implying a 62 per cent upside.We believe that baidu will benefit from the recovery of advertising business in China, as: 1) baidu expects revenue growth of about 70% in the second quarter compared with the same period last year;2) hangmei media expects revenue growth of 50-65% year-on-year in 2010;3) both sina and sohu expect an increase in advertising revenue.Our analysis shows that: 1) the total revenue of focus may increase by about 20% year-on-year this year, while the total revenue in 2009 decreased by 21% year-on-year;2) focus will increase its non-us gaap operating profit ratio by 10% to 30% year-on-year in 2010, mainly due to operating leverage;3) due to the growth rate of local economic development and the increase of disposable income, we believe that the expansion of focus into third-tier and fourth-tier cities will bring more advertising revenue to focus.4) the replacement cost of net cash and focus outdoor advertising accounts for about 35-40% of its market value.

Stock rating: overweight

Industry outlook: attractive

Actual earnings per share calculated by ModelWare model: $1.61 as of December 2009

Expected eps calculated by ModelWare model :(December 2010) usd 0.40;(December 2011) $1.17;(December 2012) $1.27