Buying Mississippi might fit your portfolio

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Published: August 30,1999

In the wake of mergers and acquisitions, new construction and extraordinary growth, investors are riding the wave of change in the banking, gaming and telecommunications industries of Mississippi-based companies.

Recently, Clinton-based MCI WorldCom announced its intent to purchase two Jackson-based companies — SkyTel Communications and Wireless One. Friede Goldman, headquartered in Jackson, has agreed to buy rival Halter Marine, builder of ships and offshore rigs. Mississippi-based Deposit Guaranty National Bank was purchased by First American Corp., which is being bought by AmSouth.

“MCI WorldCom’s stock is down because of a downward shift in the high-tech area and because of mergers, but I’m not concerned,” said Nancy Lottridge Anderson, president of New Perspectives Inc. in Clinton. “People are waiting to see if they’re going to be able to absorb that much debt again. They did it with MCI and have not had any trouble. I think they’ll be fine. They’re just trying to put all the pieces together that will make them the powerhouse that people are predicting they’ll be.”

J. Harmon Bays of Legg Mason Wood Walker Inc., said now is a great time to be adding to or establishing a new position in WorldCom.

“(MCI WorldCom) is one of the fastest growing telecommunication companies in our country,” Bays said. “The stock is down more than 20% from its high due to concern over a price war in their industry. Their merger with SkyTel has been given FTC approval and with shareholder approval should close within the next several months. In my opinion, things continue to look very positive for MCI WorldCom.”

James M. Leonard, vice president of Prudential Securities in Jackson, said MCI WorldCom has a 12-month target price of $115.

“MCI WorldCom is rated a strong buy, is on Prudential’s select list and is designated as the single best idea in the wireline telecom sector,” he said. “We believe MCI WorldCom is the best positioned company to take advantage of the fastest growth segments of the telecommunications industry with capital investments yielding rapid returns on investment in areas such as data, Internet and international markets. We forecast enviable top line growth of 16% to 18% over the next five years based on the fastest growing segments becoming a larger part of the overall revenue mix.”

Mergers of financial institutions are decreasing the number of Mississippi-based banks. As a result, the acquired banks are losing customers, Anderson said.

“While it may make banks more efficient when larger banks take over, the home-town feel is sometimes lost,” she said.

Purvis-based Lamar Bank, a subsidiary of Lamar Capital Corp., bucked the trend by going public last year. But that’s not the norm, she said.

“We’ll see more banks continue to dwindle as mergers take place,” she said.

Earlier this year, Joseph Coccimiglio, senior gaming and lodging analyst for Prudential Securities, said the gaming industry has tremendous potential because of a steady rise in travel expenditures, an aging population and the rapid growth in travel by the 55 and up age group. Investments in larger companies, such as The Mirage, which includes Biloxi’s Beau Rivage, are favored over smaller, lesser-known casinos.

“When investing in casino companies, many people ask about hurricanes,” said Leonard. “Most places are built to withstand worst case scenarios and they have business interruption insurance. Last year’s hurricane only delayed the opening of Beau Rivage by a couple of days. Hurricanes are not significant to the overall impact of casino companies.”

Byron Cheatham, vice president of sales and marketing for Unity Communications, a private Jackson-based telecommunications company that may become public, said Mississippi is an excellent place to raise private equity.

“We found the investment community to be very hungry for investment opportunities like ours,” he said. “We also see Mississippi as a great place to be for the execution of an idea down the road. Typically, in the case with most IPOs, the brokerage houses or underwriters get the lion’s share of the initial stock and initial public offering, but there is an opportunity for the public market to get a taste of it, too, especially after a little bit of time has passed. We see a tremendous amount of value at having a significant-sized private equity investor base and playing off on that whenever we look to do an IPO.”

Founded in 1996 by former MobileComm executives, Unity Communications has more than 37 offices in 22 markets across the nation with annualized revenue of approximately $40 million.

Contact MBJ contributing writer Lynne Wilbanks Jeter at lwjeter@yahoo.com or mbj@msbusiness.com.

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