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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: lee kramer who wrote (75961)	12/20/1999 4:09:00 PM
From: Jenna	Respond to of 120523

Long CINR high of day upgraded twice looking for a rebound and perhaps a takeover.. earnings play as well Date Broker Comment 12/14/99 Bear Stearns upgraded from attractive to buy, stk price overlooks strong fundamentals, raising target from $27 to $32 12/10/99 Ing Baring Furman Selz reiterates strong buy, announced that China Central TV has agreed to broadcast Arthur, this broadens CINRs Intl reach 12/7/99 Jefferies & Co. reiterates buy, announced that it will co-produce a new 26 hour animated series entitled The Baskervilles From Media and Entertainment in "the Worldy Investor" Poised for By David H.M. Baker Columnist 12/02/1999 The current market environment where investors are shooting first and asking questions later has given those who are patient a once-in-a-lifetime opportunity to own the cheapest content company on the planet. I last wrote about Canadian-based entertainment and education play Cinar (CINR: Nasdaq) in mid October, and came back to it in a follow up on November 1. I can't stay away; I believe more than ever that it is a must-own stock. Tax-fraud allegations against the company have taken the stock down more than 50% since its mid-October level, and has left a real sour taste in the mouth of its investors. I spent more than half an hour on the telephone last week grilling Chief Executive Officer Ron Weinberg as to the veracity of the recent allegations As a result, I believe the accusations are politically motivated and, in a worse-case scenario, will have a 3% impact on FY2000 earnings. I am aggressively buying Cinar for all my accounts at current prices and am advising other firms I am associated with to do the same. This is unquestionably one of the most exciting companies I have analyzed in a long time. Content, Content, Content Why is this? I cannot say it enough, it's all about the content. Once the infrastructure is built and broadband arrives, much of the excitement for the companies building the network will subside. Proprietary content is another story altogether; it provides a perpetual income stream for its owners. Content will reign as king of the education and entertainment world and those that understand this today will make a fortune. Look at the numbers. At its current $12.50 price, the company has $5 per share in cash, no debt, ownership in a Canadian children's cable network that is on the books for $400,000 but which has a market value of between $20 million and $30 million, and a film library that other analysts have valued at between $12 to $20 per share. So at its net current price of $7.50 ($12.50 minus the $5 cash) the market is valuing Cinar at a 37.5% discount to the low-end valuation of its library. And it's valuing its education assets, which will generate over $80 million in sales and $47.3 million in gross profit in 1999, at zero. The other recent event that will add considerable value to Cinar, and which demonstrates the foresight of this management, is its investment in Lightspan Partnership, a provider of curriculum-based educational software and Internet products. This business dovetails very nicely with Cinar's existing Highreach Learning, Carson-Dellosa and Edusoft units that provide similar products to the educational market. Cinar is investing $22.5 million in this venture, of which $12.5 million is pre-IPO and the balance will go in after the company's initial offering. One of the most impressive aspects of this deal is that Lightspeed is backed by the most impressive entertainment investors in the world, including Liberty Media (LMGA: NYSE), Microsoft (MSFT: Nasdaq) and Comcast and high-profile venture capitalists Kleiner Perkins Caufield & Byers and Accel Partners. Lightspeed has already filed its S-1 and will most likely go public in sometime in the first quarter of 2000. This will effectively achieve several major strategic initiatives for Cinar. One, it will provide another channel of distribution for its product. It will reduce what would have been a significant capital investment to recreate this vehicle on a standalone basis and it will allow the company to monetize the value of its investment in a much shorter time horizon for its shareholders. Cinar will own approximately 4% of this new company which given the levels that these IPO's trade could represent a considerable portion of Cinar's current value. Now back to the numbers. Cinar is expected to make 60 cents this year and 73 cents next year based on the latest estimates, which correlates to a forward price-earnings ratio of 21 times and 17 times respectively. These forward valuations represent a considerable discount to its past and future growth rates, which in this market for growth-oriented companies is truly ironic. One point I cannot stress enough is that broadband telecommunications are going to change the way we live. It will transform way we communicate, entertain and educate us from a passive into an interactive medium. Other players like Disney (DIS: NYSE) and MGM (MGM: NYSE) will also prosper, but they do not possess the upside of Cinar at its currently depressed price level. I would not be surprised to see these shares back at their October levels early in the first quarter of 2000, which would represent a 100% gain from today. Tax selling may bring additional pressure on the shares but I believe most of this has already taken place. In a worst-case scenario, I believe these shares will outperform all the major indices over the next year and have an excellent chance of delivering triple-digit returns to patient investors. Reboundhttp://www.worldlyinvestor.com/index.cfm?fuseaction=main&silo=industry_sectors&depth=1&industry=17