Entertainment Properties Trust (EPR), the only real estate investment trust specializing in megaplex theaters, has been mostly a dividend play. But now, it has attracted growth investors, too. So says Al Otero of European Investors, whose $2 billion portfolio bought into EPR two years ago when it traded at 11. The stock has since rocketed to 32. In September, Otero bought more shares, at 30. The reason: While EPR's 8% dividend yield had slid to 6.2%, its earnings growth has been fast, mostly because of smart buys. CEO David Brain says EPR's October purchase of a big stake in New Roc City, a 447,000-sq.-ft. complex in New Rochelle, N.Y., will add 15 cents a share to 2004 operating earnings. Consensus estimate for 2004 (without New Roc) is $2.91 a share, vs. forecasts of $2.63 for 2003. Brain says that, with EPR's full acquisition pipeline, earnings growth will be surprisingly robust. Such growth, says Otero, plus the 6.2% payout, deserve a higher multiple. Right now, EPR trades at an 11% discount to its peers, notes Jay Leupp of RBC Capital. He says EPR is appealing and rates the stock "outperform." RBC has done banking for EPR.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them. By Gene G. Marcial