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A Hot Splice In Video And Audio?

Inside Wall Street


Not everybody thinks mergers are made in heaven, even if the parties involved do. When HMG Digital Technologies announced in mid-June it was merging with privately owned Allied Film Laboratory, HMG shares skidded from 71/2 to 61/4. Since then, it has continued sliding, to 51/2. But money manager Gary Kaminsky of Cowen & Co. is far from discouraged. He has been buying despite the dip. Why?

"Investors either misunderstand or don't care about the very positive things happening at HMG," says Kaminsky. He says the combined company, to be named Allied Digital Technologies, "will be a pure play in the emerging CD and CD-ROM software industry." Kaminsky got into the stock as early as May, 1993, when HMG merged with RCL Acquisitions.

With the latest merger, the two companies will have combined sales of nearly $150 million. HMG, a major duplicator of audio- and videocassettes, posted sales of $46.9 million in 1993, while Allied, which duplicates movie films and videocassettes, generated revenues of $93.2 million.

HMG currently trades on the American Stock Exchange. After the merger, the company is expected to trade on the AMEX. HMG recently opened a new replication facility in Hauppage, N.Y., for compact disks and CD-ROM disks. PolyGram, Capital Cities/ABC, and Sony are among HMG's big customers. Kaminsky expects the stock to double easily in a year. One analyst sees the company earning $1 a share next year.GENE G. MARCIAL

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