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Travel and Leisure Companies  Poised to Fare Well in 2000 due to Steady Growth in Economy, 
High Consumer Confidence 
 
SAN FRANCISCO, Oct. 1, 1999 - The following is being issued by Banc of America Securities, a member of the National Association of Securities Dealers, CRD number 26091:

Remaining bullish on the travel and leisure sector, Banc of America Securities� analyst, J. Cogan, argues that many travel and leisure companies are poised to fare well in 2000 due to a steady growth economy, high consumer confidence and favorable demographic trends.

According to Cogan, the cruise line industry is especially positioned to prosper in the next few years.

�The cruise industry should experience smooth sailing into the next millennium,� said Cogan, who has rated the industry the #1 group in his travel and leisure coverage. Cogan noted that cruise demand has been extremely strong largely because of new capacity with improving cruise product offerings, the industry�s continued strong value proposition and increased brand awareness. Although the stocks have appreciated significantly over the past few years, Cogan believes that current conditions continue to provide significant opportunities for investors.

Cogan made his comments at the 29th Annual Banc of America Securities Investment Conference, which runs through October 1 at the Ritz-Carlton Hotel in San Francisco. This former Montgomery Securities conference bears a new name but boasts a program that lives up to its impressive reputation. The five-day conference features 250 presentations from companies that are driving the Business Services, Consumer & Retail, Energy, Entertainment, Media & Telecom, Financial Services, Health Care, Industrial Growth, Real Estate & Lodging and Technology industries.

Cogan believes that the pre-millennium outlook for cruise stocks is positive and will translate into opportunity for investors for several reasons: 

  • Industry experienced record net yield increases in 1998 and Caribbean strength boosted yields in the 2nd and 3rd quarters of 1999.
  • 4th quarter bookings are on track and solid returns on investment (ROI) on new capacity are expected.  Industry is highly consolidated and there are huge barriers to entry�ship yards are essentially full through 2002.
  • Companies have significant operating leverage and strong cash flow. 
  • Industry will realize better than 10% annual growth in revenue (totaling $13.4 billion in the North American market by 2002) and 17- 25% annual earnings-per-share growth over the next five years. 
  • Industry has been largely unaffected by negative public relations about events such as oil dumping, cruise line fires, etc. 
Cogan recommends Carnival Corp. ((NYSE: CCL - news) CCL, $43-15/16, Strong Buy) and Royal Caribbean ((NYSE: RCL - news) RCL, $44-7/8, Buy)* in his travel and leisure coverage.
Cogan believes the gaming sector is over its �capacity hump� and that many gaming stocks are poised to appreciate from current levels. In late 1998/early 1999, investors and analysts worried about overcapacity in Las Vegas, a slowing U.S. economy, lingering Asian financial crisis, insufficient airline capacity and the political implications of the industry.

However, these stocks are beating the odds, Cogan notes. Visitation has exceeded significant capacity growth in Las Vegas, allowing most companies to meet or exceed earnings expectations. Cogan suggests there are many near term catalysts that could propel gaming stocks and that it is better to be early to this party than late.

Cogan believes that the downside risk in investing in gaming stocks is limited, 3rd quarter 1999 trends were positive, and the 4th quarter looks promising with conventions, prize fights and the upcoming �Millennium Party� on the docket. Capacity issues should fade after 1999 and these companies will have a lot of cash on hand, which could be used to buy back stock, Cogan says. He recommends Harrah�s Entertainment ((NYSE: HET - news) HET, $27-11/16, Strong Buy)* and Park Place ((NYSE: PPE - news) PPE, $12-11/16, Strong Buy)* as his top value stocks and also rates MGM Grand ((NYSE: MGG - news) MGG, $50-11/16, Buy) and Station Casinos ((NYSE: STN - news) STN, $23, Buy)* �Buy.�

Cogan devoted the final portion of his presentation to the rental car industry, noting that the industry�s leaders have consistently beat estimates and that pretax margins have grown 2-5x since 1996. Cogan said that the industry�s comparables are more difficult going forward, making rental car companies more dependent on higher pricing and acquisitions. The good news is that rate increases, spurred by Hertz, are sticking in most markets and Cogan expects this trend to continue into the 4th quarter of 1999 and into 2000 especially as AutoNation is spinning out its rental car operations.

Cogan believes that Hertz ((NYSE: HRZ - news) HRZ, $43-11/16, Strong Buy) is the #1 choice in the segment as it has the most recognized brand, top revenue base and the highest industry pre-tax margins. Hertz has exceeded estimates for nine consecutive quarters and Cogan believes the stock�s valuation of 14x estimated 1999 earnings-per-share is highly attractive.
Banc of America Securities LLC was co-manager of public offerings for Harrah�s Entertainment, Inc.; Park Place Entertainment Corporation; Royal Caribbean Cruises Ltd.; and Station Casinos, Inc. in the last three years.

Banc of America Securities LLC (BAS), a subsidiary of Bank of America Corporation, is a full-service investment bank and brokerage firm. With principal offices in San Francisco, New York City and Charlotte, BAS employs more than 4,000 associates in offices around the country, and with affiliates, offers capabilities worldwide.

Bank of America Corporation, with $614 billion in total assets, is the holding company for one of the largest banks in the U.S., with operations in 21 states and the District of Columbia. 

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Contact:
Banc of America Securities LLC
 
Also See: Last of Vegas� Big Four Projects - Paris Hotel and Casino Likely to Yield Highest Returns / Sept 1999 
Rapid Growth Predicted for the Timeshare Industry / Strong Profits Seen for the Ski Industry According to NationsBanc Montgomery / Jan 1999 

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