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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: red_dog who wrote (58815)	8/31/1999 4:37:00 PM
From: red_dog	Read Replies (1) \| Respond to of 120523

Recent price weakness ignores improving fundamentals. Notwithstanding increasing business visibility for 3Q, robust early pacings for 4Q, and continued underlying radio industry strength, shares of AFM have declined 7% in recent trading and 15% since last month. Increased confidence with 3Q estimates. Recent conversations with management reaffirm our 3Q projections for same-station radio revenue growth of 14-15% , BCF improvement of 18%-plus and ATCF per share of $0.64 versus consensus of $0.62. The larger (Chancellor) markets are pacing ahead in the high-teens with the smaller market (Capstar) properties realizing top-line growth in the low teens. Our consolidated 3Q estimates are for net revenues of $602 million, BCF of $297 million and EBITDA of $283 million. 4Q looking even better! While still early in the period, we believe the company is pacing ahead 25% in 4Q-with broad-based strength across its large and small markets and virtually all ad categories. To date, AMFM has sold approximately 20% of its 4Q inventory. While we would not extrapolate the growth for the balance of the quarter, we believe 4Q growth could at least rival its stellar 1Q99 performance. Attractive valuation. With the shares currently trading at just 13.2x 2000E EBITDA (17.5x 2000E ATCF), we believe the shares offer an exceptional value. Our near-term price target of $57 represents a multiple of 15x 2000 EBITDA and our 12-month target is just shy of $70. By comparison its peer group of Infinity and Clear Channel are currently trading at 19 and 21.5x our 2000 EBITDA estimates, respectively. Believe burn-out of "Jammin' Oldies" has been exaggerated. While the company's much heralded Jammin' Oldies format launch - across 11 of its major market properties - has lost some of its earlier luster, the stations are still on track to double their 1998 cash flow and are generating far higher ratings than they did under their previous formats. Not wanting to minimize the importance of their contribution, we recognize the "Jammin'" stations represent just 11 of its 450 stations. Expect AMFM Inc. to continue to rationalize its sprawling station base. We believe the station dispositions announced last week - four properties in Tri-Cities, WA - represent the beginning of a strategic initiative to divest its non-core, small market or unclustered radio stations. The stations which are being sold for $4 million generated combined 1998 BCF of $200,000, well below the radar screen of an entity with projected 1999 BCF of $940 million. Believe sale of outdoor assets on track to close between September 15-30. Our estimates assume a September 30 close, however should the deal close September 15, there could be up to $0.01 of 3Q ATCF dilution. Reiterate Buy rating. In short, we believe the current valuation and depressed share price is inconsistent with the company's solid 3Q and robust 4Q business prospects. While we expect the shares to remain volatile, we believe the potential reward far outweighs the near-term risk.