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Charm Profit May Gain 25%, CFO Says, Citing Estimates

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(Corrects source of growth estimate in headline and second paragraph of story originally published July 29.)

July 29 (Bloomberg) -- Charm Communications Inc., a Chinese advertising agent whose clients include General Motors Co. and Bank of China Ltd., may post a 25 percent gain in profit this year as ad spending grows in the world’s second-biggest economy.

Total advertising spending in China will in the long-run increase at about 1.5-times the rate of economic growth, Chief Financial Officer Wei Zhou said in an interview from the company’s offices in Beijing. China’s economy grew 9.5 percent in the second quarter, for which period Charm posted a 30 percent gain in net income. Annual 2011 profit may rise 20 percent to 25 percent, Zhou said yesterday, citing estimates by analysts he didn’t identify. Charm doesn’t provide its own full-year profit forecasts, Zhou said.

“We have been able to outperform the overall market by winning new customers and getting additional advertising spending from existing customers,” Zhou said. “We have been expanding our digital service capabilities, with increased spending on online video and search portals.” The company’s 2010 profit more than doubled from 2009.

Charm, which helps clients place ads in domestic media including state broadcaster China Central Television, last month bought a 60 percent stake in Chinese search-engine marketing company ClickPro to bolster its online advertising business. The internet may surpass newspapers next year to become the second-biggest recipient of advertising spending in China after television, Zhou said.

China is the world’s biggest internet market by users with more than 480 million, the China Internet Network Information Center said in a report this month.

Charm’s American depositary receipts have gained 17 percent in Nasdaq stock market trading this year, compared with 4.3 percent increase for the Nasdaq Composite Index.

To contact Bloomberg News staff for this story: Penny Peng in Beijing at ppeng18@bloomberg.net

To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net