A Well Connected Toy Model Maker

Revell-Monogram is a victim of last year's Desert Storm: The Persian Gulf war boosted sales of its toy-model kits of jet fighter planes, tanks, and helicopters, causing revenues to jump to $106 million, with 1991 earnings rising to 62 a share, vs. a loss in 1990. But those good numbers can't be sustained this year, some analysts say. So Revell has plunged--from 12 a share in March to 6 on Aug. 25.

This, however, doesn't faze Eric Kuby, chief investment officer at Chicago-based Rodman Advisory Services, who recently boosted his stake in the company to nearly 10%. What's the scoop? Sure, this year will be a downer for Revell, with earnings of 46 cents a share, Kuby estimates. But next year, he thinks it will earn 70 cents, partly because of new products and a reduction of high-cost debt. Given a p-e of 15, he says, the stock should be worth 10 1/2.

But that's not the only excitement in the stock. Kuby believes that Revell-Monogram, the world's leading maker of toy-model kits, is a potential takeover candidate. "With its well-established distribution channels in the U.S. and Europe and clean balance sheet, Revell is an attractive target for any of the large toy companies," says Kuby.

Kuby notes that Odyssey Partners, which has three seats on the board, owns 22%. Another group, led by Benjamin and Edmond de Rothschild, controls 14%. With such stakeholders, says Kuby, selling the company wouldn't be a problem. Odyssey declined to comment on its plans for Revell.

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