|
Capstar to cap week's IPOs
|
 |
May 25, 1998: 4:06 p.m. ET
Radio broadcaster hopes Wall Street will tune in to its IPO
|
NEW YORK (CNNfn) - Radio broadcasting may not offer the same allure as the Internet, but it's far from a stodgy business. And now investors will have an opportunity to invest in it through this week's highest-profile IPO: Capstar Broadcasting, the nation's largest radio company.
Capstar, which owns and operates 299 stations, mostly in mid-sized markets, is hoping to raise about $600 million by floating 31 million shares at $18 to $21 apiece.
Unquestionably, the industry is running on all cylinders as reflected by the better than 100 percent average return for radio stocks last year and 18 percent so far this year.
Helping to drive the growth: record consolidation set off by a 1996 federal law lifting ownership limits, a fresh appeal to advertisers, and a red-hot economy yet to simmer.
Radio is one of the most profitable sectors in the media business with operating profits north of 35 percent, according to BIA Research, an industry research firm. Radio advertising grew by 9.3 percent last year, outpacing other advertising growth in all other media with the exception of cable.
The question investors have to ask is at what price is Capstar attractive. At its mid-point, the company will be trading at a 14.5 times next year's cash flow, a multiple slightly higher than its middle-market peers. That's "a bit rich," according to Bishop Cheen, media analyst at First Union Capital.
Investors with their sights sets on another Internet IPO may consider Inktomi. Best known for its HotBot search engine, the San Mateo, Calif., company recently replaced AltaVista as the search engine behind Yahoo!'s Internet directory.
The company's new and hot technology -- appropriately named "Traffic Server" -- is software that alleviates data grid-lock, particularly during those prime-time searching times. Tests show it can support more than 300 million hits per day, or 3,488 operations per second.
However, Traffic Server is Inktomi's future. The search-engine product accounted for 99 percent of the company's $5.8 million in sales last year. Losses totaled more than $20 million. As is the case with many start-ups, Inktomi admits it anticipates losses for some time.
Mark Brown of Market Analytics, an IPO research firm, is rating Inktomi's IPO as a "strong buy" with an upside potential of 30 percent from its expected $13 IPO.
Other deals to look out for this week: Answer Think Consulting Group, a company that offers expertise in information technology. Morgan Stanley is behind the $50 million offering.
American Aircarriers is set to offer 2 million shares at $7.50-$8.50. The company sells and distributes airplane components and spare parts.
LandCARE USA is expected to float $55 million. BT Alex Brown is leading the offering of this provider of landscape and tree services to commercial properties.
-- by Bambi Francisco for CNNfn Interactive
|
|
|
|
|
 |
|
