Sweet Music And Returns From A `Blind Pool'

'Blind pools" have a lousy reputation in the investing world. They are formed to merge or acquire an operating company with, supposedly, great growth potential. All too often, blind pools wind up as a front for stock manipulation schemes. But in the hands of a smart, reputable executive, a blind pool can offer dazzling prospects. So it is with the $7 million investors sank into RCL Acquisition Corp. when it went public in July, 1992. Those investors may have hitched their cash to a potential bright star.

RCL has attracted some big, savvy investors because of the seed-money organizers behind it, including RCL President H. Sean Mathis, former president of Ameriscribe, a major financial printer, and Mark Friedman, RCL's vice-president and a partner at the prestigious law firm Shea & Gould.

In February, RCL discovered an ideal target--HRM Holdings, whose Hauppage Record Manufacturing unit, a major maker and duplicator of audio and videocassette tapes for music and entertainment companies. HRM posted revenues of $40 million and profits of $1.8 million in fiscal 1992, ending last July 31. RCL and HRM have agreed to merge in a deal that should be completed sometime over the next two months. Once merged, the company will become HMG Digital Technologies.

BARN-BURNER. RCL's stock has held up well but has been no barn-burner, rising from 4 1/2 a share in late October to nearly 6. But some pros, who believe a big move may lie ahead, see tremendous earnings growth from RCL-HRM's share of the recorded-music market. "RCL's stock represents an opportunity to get into the ground floor of the booming recorded-music business," says one money manager.

The big kicker to earnings is an impending deal by RCL-HRM to acquire a compact-disk-duplication facility in the Southwest with annual sales of $30 million. Analysts project that the company's CD sales should increase 50% by 1995.

Analyst Tom Heysek at RAS Securities estimates that the combined RCL-HRM should earn 41 a share on revenues of $53 million in the year ending July 31, 1993, and 66 on revenues of $85.5 million in 1994. By 1995, the CD plant's sales should kick in, says Heysek, who sees RCL-HRM's earnings rising to 95 a share that year. Heysek expects shares of RCL to at least double in the next 12 months.

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