Is Spacehab Set To Soar?

Shares of Spacehab (SPAB), the first company to develop and operate habitable modules aboard the U.S. Space Shuttle, remain firmly earthbound. Spacehab went public on Dec. 20, 1995, at 12. They're now at 10, down from 15 in early April. No matter, say some of Spacehab's almost cultish following. They're buying for one reason: They foresee NASA privatizing much of the space program, which would boost demand for Spacehab's services.

"It's the only company of its kind--a pure play on the commercialization of space," argues investment manager Renee Carret of Carret & Co., a New York firm. "You're buying a unique company on the cheap." She expects earnings of $1.50 a share this year.

With several companies, such as Eli Lilly and Schering-Plough, and other researchers performing experiments on Spacehab's labs, Carret expects it will form alliances with one or two drug or chemical companies. Formed in 1984, Spacehab developed modules for efficient use of the Shuttle's cargo bay. The company operates a payload processing facility next to NASA's Kennedy Space Center at Cape Canaveral, Fla. McDonnell Douglas, which owns about 3% of Spacehab, designs and produces the Spacehab modules and prepares them for flight.

One New York money manager is betting McDonnell Douglas will form a joint venture with Spacehab to widen its share of the payload processing and servicing of the Shuttle. Morty Schaja, managing partner at Baron Capital Management, which owns 4.8% of Spacehab, says the stock is undervalued based on earnings, "which could grow significantly over the next three years." He sees the stock doubling in that period.

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