Inside Wall Street
DIALING INTO CHINA'S GROWTH
What small company in the West has swayed both the communist People's Republic of China and Germany's Deutsche Bank to take a stake in it? Answer: Canadian-based MTC Electronic Technologies, which has signed several joint ventures with the Chinese government to build and operate a cellular telephone network and a fax-machine factory in Shanghai, China's second-largest city. Deutsche Bank bought a 12% stake in MTC in a private placement that raised $14 million for MTC. China paid $18 million for its 12% stake.
Several pros insist that MTC is one of the best ways to participate in China's growth. Since the early '70s, the company has been selling Chinese goods such as color TV sets and VCRs in Canada, Mexico, and the U.S. In June, MTC took a 28% share in government-controlled Shanghai Cellular Telephone Joint Venture, formed to run a cellular phone system in greater Shanghai.
There is a three- to five-year wait for noncellular phone installations in Shanghai, which has 26 million people, says analyst Steve Reid of H.J. Meyers, a Beverly Hills (Calif.) research firm. The MTC phone system could be in operation as early as November, says one insider.
"MTC's prospects in China could make it a big winner," says President Warren Greene of American Investors Advisors. The stock traded at 10 last year on NASDAQ but is now down to 5. The drop stems from investor worry about the political situation in China, explained MTC Chairman Miko Leung. "But I'm not worried."
At its current price, the stock is a bargain, says Greene, who believes it could double in a year, when the phone system is off and running. He expects revenues to climb to $57 million in 1993 vs. $42 million this year. Earnings should jump to 65 cents to 75 cents a share vs. 36 cents this year.GENE G. MARCIAL