Integrity Music has investor's blessing
By Thom Calandra, CBS MarketWatch
Last Update: 10:36 AM ET Dec 1, 1998
Columns & Opinions
SAN FRANCISCO (CBS.MW) -- One of the early investors in Didax,the evangelical
Web site whose stock is flirting with heavenly levels, has
another tiny company whose shares might be ready for a ride.
Kyle Krueger, president of Apollo Capital Corp., saw shares of Didax
(AMEN) explode this past week after investors hankered for U.S.
Internet companies of all types and sizes. Didax (market cap $60 million)created
www.crosswalk.com, a Christian Web site.
Didax, a money-losing company like most Internet plays, generates revenues through
the sale of sponsorships and advertising and the online retailing of Christian and
family-friendly products. It also gets commissions and referral fees from co-marketing
partners.
"One micro-cap idea, which I own, is Integrity Music (ITGR)," says Krueger. Integrity
Music shares popped higher this week, doubling in a day amid the rush for tiny Internet
companies that could benefit from Americans' increased use of the Internet to shop and
harvest information.
The Mobile, Ala., company, he says, sells at less than 10 times earnings per share and
three times debt-adjusted cash flow. That's right: this company is profitable. In the nine
months ended Sept. 30, Integrity made $1.1 million, or 19 cents a share. Nine-month
sales rose 10.9 percent to $27.1 million.
Integrity publishes and produces Christian music, including categories
known as praise and worship, children's and gospel. The Nasdaq Stock
Market moved the company's stock in October to its small-cap listings
after Integrity failed to meet listing requirements for the far larger Nasdaq National
Market.
Nasdaq had said that Integrity's market cap, aside from shares held by insiders, didn't
meet or exceed $5 million. That's when the company's shares sold for less than $2 each.
Now they sell for about 5, with a market cap of $27 million.
Krueger says Integrity generates $4 million to $5 million of free cash flow annually. He
says the shares, based on the company's "real business value," is closer to $9 a share.
Integrity's stock fell early Tuesday to 5, before this column was published. On Monday,
the stock rose 3 1/8 to 6 1/8.
Krueger estimates Integrity's song catalog will generate $5 million of
royalties in 1999. Integrity has about a 40 percent market share of a $75 million
category in Christian music, he says.
By the way, "the company has an Internet presence that is totally
undiscovered by investors," Krueger says. The Web site is at
integinc.com.
"There's no doubt that the ministry of Integrity would be impossible
without the talented and anointed group of people that God has
assembled for the task," the Web site says. "Each of our artists and
worship leaders have their own testimony of the way God led them to
become a part of Integrity's team."
Integrity's artists include Martin Ball, the son of Dennis Ball, a leader in the early
Charismatic movement in England. |
