Industry outlook report............... This market has so much
more room for growth, and we are getting in at bargin basement
prices.
Dan #103
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STOCK REPORTS Charter Communications 13-NOV-99
Industry Outlook
Year to date through October 22, 1999, the S&P Broadcasting (Television, Radio & Cable) Index surged 46.2% versus a rise of 5.0% for the S&P 1500. The group's market visibility has been aided by a number of significant deals, including AT&T's recent or pending acquisitions of Tele-Communications and Media One. These, and other recent headline-grabbing deals have pushed all of the cable system operators into the spotlight as takeover candidates. Since operating prospects for television and radio broadcasters are also positive, and since the recent announcement of liberalized TV station ownership rules is seen boosting station values, we expect this industry segment to outperform the market through the remainder of 1999, and through 2000. Industry: Broadcasting (Television, Radio & Cable)
Versus S&P 1500 Industry Index
Price Performance as of month-end 10/29/99
Although FCC price restrictions on subscriber charges expired in April 1999, the cable industry as a whole is expected to remain relatively conservative in its pricing policies, with rate hikes on basic cable likely to average 4% to 5%. In spite of healthy growth in direct broadcast satellite (DBS) services, DBS has not proved to be a significant threat to cable operators. Cable subscriptions continue to grow roughly 2% per year on average. Growth in cable subscriptions have also proven to be relatively immune to economic conditions in general. Thus, a slowing economy will not affect revenues going forward. A move that has positive ramifications for cash flow and stock performance is the introduction of digital technology. This technology, in addition to vastly improving reception, substantially expands channel capacity. The industry is in the early stages of this transformation, but is expected to be fully digitalized by the end of 2002.
The market for TV stations received a recent boost from newly relaxed FCC ownership restrictions. Relaxation of the one-to-a-market rule guarantees that station trading through 2000 will stay at healthy levels in spite of high prices. Television advertising revenues for 1999 are expected to rise about 7%, aided by year 2000-related marketing and the absence of the GM strike that was partially responsible for a relatively soft 5% gain estimated for 1998. We expect an advance of close to 13% in radio advertising in 1999, also boosted by year 2000-related marketing and promotional efforts. Radio advertising revenues advanced nearly 12% in 1998.
Industry: Broadcasting (Television, Radio & Cable)
*Peer Group: Based on market capitalization within industry
Peer Group Stock Symbol Recent Stock Price P/E Ratio 12-mth. Trail. EPS 30-day Price Chg. % 1-year Price Chg. % Beta Yield % Quality Ranking Stk. Mkt. Cap. (mil.$) Ret. on Equity Pretax Margin % LTD to Cap. %
Charter Communications CHTR 24 NM NA -8% NA NA Nil NR 4,091 NM NM 73.0
AT&T Corp-Liberty Media'B' LMG.B 44 1/2 NM NA 11% 125% NA Nil NR 4,825 NM 7.4 NA
Adelphia Communic'A' ADLAC 56 3/4 NM NA 5% 55% 0.92 Nil C 2,856 NM NM NA
Chris-Craft Industries CCN 72 3/4 NM 0.36 10% 64% 0.88 Nil B- 1,844 2.1 18.5 Nil
Comcast Cl'A' CMCSA 43 3/8 12 3.52 28% 87% NA 0.1 B- 2,742 45.1 30.3 50.7
Hispanic Broadcasting HBCCA 80 NM 0.61 -1% 84% 1.28 Nil NR 2,978 5.3 27.2 0.2
Infinity Broadcasting Corp. INF 34 87 0.39 10% NA NA Nil NR 5,099 3.1 25.6 5.0
Jones Intercable Cl'A' JOINA 61 3/8 NM -1.96 21% 119% 0.77 Nil C 2,218 NM NM NA
Rogers Communications RG 21 5 3.96 32% 162% NA Nil C 2,563 NM 22.1 130.4
Shaw Communications SJR 28 3/4 NM 0.23 4% 42% NA 0.3 NR 2,243 1.4 11.3 42.8
TV Azteca S.A. TZA 5 1/4 19 0.28 15% -44% NA 0.4 NR 3,052 NM 6.8 62.1
USA Networks USAI 47 NM 0.23 27% 92% 1.09 Nil NR 6,360 3.8 10.8 11.1
UnitedGlobalCom Inc'A' UCOMA 107 1/8 22 4.98 32% 753% 1.89 Nil NR 3,390 NM NM 188.2
Univision Communications UVN 85 1/4 NM 0.51 -1% 148% NA Nil NR 5,528 2.5 8.7 48.3
Westwood One WON 46 1/4 NM 0.44 10% 136% 1.26 Nil B- 2,570 12.9 9.0 68.8
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Copyright © The McGraw-Hill Companies, Inc. This investment analysis was prepared from the following sources: S&P MarketScope, S&P Compustat, S&P Stock Guide, S&P Industry Reports, Vickers Stock Research, Inc., Standard & Poor's, a division of The McGraw-Hill Companies, 55 Water St., New York, NY 10041.
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