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NEW YORK, Jan. 28, 1999 -- The following is being issued
by NationsBanc Montgomery Securities, a member of the National Association
of Securities Dealers, CRD number 26091:
Many travel and leisure companies are poised to fare well in 1999 and 2000 due to a positive macroeconomic outlook, high consumer confidence and favorable demographic trends, according to NationsBanc Montgomery Securities analyst, J. Cogan. Cogan made his remarks during a luncheon presentation at NationsBanc Montgomery's 16th Annual Hospitality Conference that has attracted 59 companies from across the nation. The conference, featuring presentations and panel discussions geared around the premier growth companies in the lodging, lodging REIT, timeshare, cruise line, ski resort, gaming, auto rental and restaurant industries, started Monday, January 25th and will run through Friday, January 29th at the Pierre Hotel. According to Cogan, the cruise line industry is especially positioned to prosper in the next few years. He noted that cruise demand has been extremely strong (including 5-6 percent net yield increases in 1998) due largely to new capacity with improving cruise product offerings, the industry's continued strong value proposition and increasing brand awareness. Although the stocks have appreciated significantly over the past few months, Cogan believes that current conditions continue to provide significant opportunities for investors. Specifically, he highlighted the following characteristics of the cruise line industry that will translate into long-term opportunity for investors:
Cogan has named the cruise line industry the #1 group in his travel and leisure research coverage and specifically recommends Carnival Corp. (CCL) and Royal Caribbean (RCL). In general, Cogan is neutral on the gaming sector. He pointed to several factors causing continued uncertainty in the gaming space including overcapacity in Las Vegas, the Asian financial crisis, a potential U.S. economic slowdown and the political implications of the industry. Despite this relatively negative environment for the gaming industry, Cogan notes that there are some decent "value plays" when investors consider valuations on "worst case scenario" estimates. He recommends Harrah's Entertainment* and Park Place* as his top value stocks and also rates MGM Grand and Sun International "Buy." Cogan devoted the final portion of his presentation to the rental car industry, noting that the industry's profitability has improved greatly over the past few years. Cogan expects to see price increases of 2% in 1999 combined with volume increases of 3-5%. Cogan noted that the industry has significant operating leverage from both the revenue and cost-side of the equation, including benefiting from flat vehicle costs, airport concession fee pass-throughs, and improved fleet utilization. Cogan believes that Hertz is the #1 choice in the segment as it has the most recognized brand, top revenue base of $4.6 billion and the highest industry pre-tax margins. Hertz has exceeded estimates for seven consecutive quarters and Cogan continues to believe that 1999 estimates remain conservative. He believes the stock's valuation of 15x estimated 1999 earnings-per-share is highly attractive. NationsBanc Montgomery Securities LLC, a subsidiary of BankAmerica Corp., is a full-service investment bank and brokerage firm with approximately $2.7 billion of regulatory capital. The company provides research, trading and issuance in the equity and fixed-income markets (high yield, emerging markets, high grade and mortgage-backed markets). Other services include MA advisory, financial buyer coverage, loan syndications, global investment banking, real estate finance, mortgage finance, money markets and a primary dealer. NationsBanc Montgomery Securities is a registered broker-dealer with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers and the New York Stock Exchange. * NationsBanc Montgomery Securities LLC was manager or co-manager of a public offering and/or has performed investment banking or other services for this company in the last three years. |
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