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For many, investing in Mississippi makes sense

Editor’s note: Market capitalization statistics used for this article were posted on March 16, 2005. SOURCE: Vector Money Management, Jackson.

Even though Mississippi has lost more than a dozen publicly-traded companies in the last decade to acquisition or bankruptcy, including the former telecom powerhouse and Fortune 500 company, Clinton-based WorldCom, the vast majority of the 19 publicly-held Mississippi-based companies have outperformed the S&P 500 in price appreciation since 2000.

In the 12 months ended March 16, Callon Petroleum Company (NYSE: CPE) reported the highest percentage price change, 52%. With a market capitalization of $269 million, its revenue for the last four quarters was $120 million. For the same time period, its price-to-earnings (P/E) ratio was 12.2 and price-to-sales (P/S) ratio was 2.25.

“Callon is finally getting some production online they’ve been working on a long time that’s generating revenue and earnings for them,” said Ashby Foote III, president of Vector Money Management in Jackson. “With their new field, Entrada, there’s potential for them to continue to increase their earnings and cash flow.”

Headed by Fred and John Callon, the Natchez-based company employs computer-aided technology such as 3-D surveys to explore and develop oil and gas properties. Even though Callon was formed circa 1950, the company did not become publicly traded until 1994.

Since the mid-1990s, Callon has focused on acquiring acreage with exploration and drilling opportunities in the Gulf of Mexico Shelf area. The company also acquired an infrastructure of production platforms, gathering systems and pipelines to minimize drilling development expenses.

Most of the company’s holdings are in the Gulf of Mexico’s federal waters, with some onshore in Alabama and Louisiana, totaling 230 producing oil wells and 250 producing gas wells. Natural gas accounts for a lion’s share of its daily production.

The Entrada discovery is located in the deepwater region of the Gulf of Mexico in 4,500 feet of water. So far, two wells and seven sidetracks have been drilled, and Callon may drill another well there later this year. The company owns a 20% working interest in this discovery with the operator, BP Amoco, holding the remaining working interest.

An uncommon thread

On the other end of the price change spectrum is Tupelo-based Hancock Fabrics (NYSE:HKF), a specialty retailer of fabric and related home sewing and decorating accessories. The company reported a price drop of 41% over the last 12 months. With a market capitalization of $171 million, its P/E ratio for the last four quarters was 53.2 and P/S ratio was .40. The company employs 6,400 people.

“They’ve certainly had some missteps in the last couple of years,” said Morgan Keegan analyst John R. Lawrence. “They were focused on getting their new facility completed, which they’ve done, and they’re trying to get to the point where they’ll have improved POS systems, which will help them with merchandising.”

Overall, the state’s nine publicly-traded banks fared well (see related story on page 31), and three agriculture-sector publicly traded companies have continued to flourish (see related story on page 30). Last November, Mississippi added to the financial services list a new publicly traded company: Knobias (KNBS:OB), a Ridgeland-based financial technology research firm founded by Key Ramsey in 1999. Through a reverse merger, the company bought the “shell” of a publicly- owned company rather than initiate a public offering of stock.

The only Mississippi-based casino, Isle of Capri Casinos Inc. (NASDAQ: ISLE), with a market capitalization of $819 million, reported $1.1 billion in revenue for the last four quarters. Its P/E ratio for the same time period was 34.0, and its P/S ratio was .74. Its stock price increased 4.3% over the last 12 months.

The family of CEO Bernard Goldstein has a majority of stock in the Biloxi-based gaming corporation, which owns and operates 16 dockside, riverboat and land-based casinos in Mississippi, Colorado, Iowa, Louisiana, Missouri, the Bahamas and the U.K., and employs 11,000. Except for Rhythm City Casino in Iowa, its dockside and riverboat casinos feature tropically-themed Isle of Capri casinos. Its land-based operations are located in Colorado.

“The gaming industry itself in Mississippi has been steady, with slow but moderate growth,” said Foote.

Over the last few months, Microtek Medical Holdings Inc. (NASDAQ: MTMD), which has some 1,800 employees, has gradually moved its headquarters from Columbus to Alpharetta, Ga., but maintains its manufacturing presence in the Golden Triangle area, said Julie Schumacher Hoggatt, senior analyst of medical technology for Hibernia Southcoast Capital.

With a market capitalization of $140 million, its fourth quarter 2004 revenues were $33.1 million, a 25% increase compared to the fourth quarter of 2003. For the last four quarters, its P/E ratio was 18.1, and its P/S ratio was 1.11.

“Microtek had a very strong last quarter,” said Hoggatt. “They beat our estimates and we were very pleased with the gross margin. It was better than we expected.”

The company produces disposable fluid collection pouches, pneumatic pumps and the Liquid Treatment System, a powder that solidifies infectious waste. Formerly known as Isolyser, Microtek is best recognized for making infection-control drapes used to cover operating room patients and equipment. Microtek’s OREX Technologies International unit generates products that can be dissolved in hot water. The company, which markets its products directly through distributors, recently licensed OREX Technologies to Eastern Technologies, who will pay Microtek periodic licensing fees and royalties.

“This year, we’re only looking for 12% revenue growth, but with the earnings surprise that we’ve seen in international medical products every quarter, it could be higher,” said Hoggatt.

High-performing REITs

The state’s two publicly-traded real estate investment trusts (REITs), Parkway Properties (NYSE: PKY) and EastGroup (NYSE: EGP), remain among America’s best performing REITs in total return to shareholder.

Jackson-based EastGroup Properties owns about 150 industrial properties nationwide comprising about 19 million square feet of space. With a market capitalization of $800 million, EastGroup reported revenues of $113 million for the last four quarters. For the same time period, its P/E ratio was 15.3 and its P/S ratio was 7.10.

Parkway Properties, also based in Jackson, specializes in the acquisition, ownership, operations, management, and leasing of mostly CBD (central business district) office properties in the Southeast, Southwest and Chicago markets. The company has a market capitalization of $622 million, and reported revenues of $170 million for the last four quarters, a P/E ratio of 10.5, and P/S ratio of 3.65.

“I don’t see any reason these REITs shouldn’t continue to prosper,” said Foote. “They have a great management team in place, and have executed and done well within their industry.”

Contact MBJ contributing writer Lynne W. Jeter at lwjeter@yahoo.com.

Former Mississippi-Based Publicly-Traded Companies

• Belmont Homes of Belmont

• Casino America Inc. of Biloxi

• Casino Magic Corporation of Bay St. Louis

• CMC Industries of Corinth

• Deposit Guaranty National Bank of Jackson

• Friede Goldman of Gulfport

• Halter Marine of Pascagoula

• KLLM of Richland

• Mississippi Chemical of Yazoo City

• National Picture & Frame of Greenwood

• River Oaks Furniture of Fulton

• SkyTel Communications of Jackson

• WorldCom of Clinton


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