Radio Days Redux?

Ever hear of Clear Channel Communications? Probably not. But if you're a radio fan, you may have tuned to one of its 24 radio stations in such cities as Houston, New Haven, and New Orleans. And if you're a stock watcher, you might be aware that Clear Channel's stock has been hot for a radio-station operator, up from 14 a share in August to 20.

Why? Believe it or not, radio is coming back and starting to make money again for Clear Channel, which also owns and operates seven television stations, including KLRT-TV in Little Rock. With Arkansas' economy now expected to perk up, Clear Channel President and CEO Lowry Mays thinks the TV station alone will produce revenues of $5 million and cash flow of $1.8 million next year.

But that's not the real draw of Clear Channel. The Federal Communications Commission's recent decision lifting national ownership limits on radio stations, and the prospect of further regulatory loosening, means that Clear Channel will be able to continue buying broadcasting assets when most of its competitors are still strapped for cash. Through cost-cutting, program reformatting, and direct marketing, the company is beefing up its radio-TV station portfolio by purchasing underperforming broadcasting properties.

Money manager Jonathan Simon of Fleming Capital Management, which owns an 11.3% stake in Clear Channel, believes the stock is way undervalued at 11 times his current aftertax cash-flow estimate of $1.70 a share. A fair current multiple is 17, considering the company's 20% annual-growth history. Simon's estimate for next year is $2.05. He thinks the stock could go as high as 35 in 1993.

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