Hello everybody....
See Barrons.....Money manager has this as 1 of his Picks....
January 11, 1999
Gems in the Ruins
A small-stock fund manager finds value in a battered sector
By SANDRA WARD
An Interview With Arnold Schneider ~ A favorite of institutional investors since his days as a partner with Wellington Capital Management, Schneider has always had a
special knack for selecting obscure and unloved small-company stocks just before they begin to realize their potential.
My next pick is Metromedia International, run by two great managers, John Kluge and Stuart Subotnick. It's the same name as Kluge's old Metro Media that he sold to LDDS Communications, which is now part of MCI Worldcom.
Q: What's its focus?
A: It's an emerging-market portfolio of telecommunications and wireless companies. Basically, Kluge has bought up licenses and properties in cellular, paging, cable and basic telecommunications -- that is, long-distance -- in Eastern Europe and in Asian emerging markets. A lot of them are joint ventures, and some are wholly owned. And the stock trades for about $3 a
pop, or potential customer. With a U.S. companies, you pay 200-$300 a pop. There are no competitors in a lot of these areas, so they have the only cellular license, the only paging license or the only cable. In many areas, some of these technologies aren't competing with basic phone service; they are the phone service. Nonetheless, the stock trades for about one-third of its net asset value. And it's growing at about 20%-30% a year.
Q: Is there a lot of capital spending related to this?
A: Yes, clearly. They have net cash on the balance sheet of $2 or $3 a share, which will fund their growth through at least the end of 1999. They also have a hidden asset. They own Snapper, the lawnmower company -- an unrelated business they could sell. So, it is a good balance sheet.
Q: How much of your interest in this is based on the company's management?
A: A lot. John Kluge has been a pioneer. He basically figured out paging and cellular in the United States before anyone else did. I think that is the opportunity he sees here, that there haven't been a lot of people competing for these licenses. Stuart Subotnick has been his right-hand man with the old LDDS. So they've worked together, and we think they're superb managers. Some of the individual divisional managements are excellent, as well. So it goes beyond the two of them.
Q: What are some of the countries Metromedia is in?
A: They are in China. Eastern Europe is probably their biggest focus. They have a great radio license in Berlin.
Q: How do you value this?
A: The stock has been trading recently at about 7. But its NAV is probably 20.
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