A Hollywood Come Back

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Only a little while ago, motion picture stocks were one of the most unpopular security groups. Today, brokerage houses are talking in glowing terms about the hidden asset values of these stocks, much as they did in this piece from years ago.

By hidden asset value, Wall Streeters mean, among other things, the film libraries of post-1948 features, which movie makers had already written off the books. For instance, Metro-Goldwyn-Mayer's unreleased feature films, which are being carried on the books at only a nominal value, are estimated to have a market value in excess of $25 million. Or, in the case of Columbia Pictures, it has about 275-300 post-1948 feature films available for television. At an estimated average price of $100,000 per film, a total of $27.5 million to $30 million can be realized from them.

Or take Warner Brothers Pictures, which in mid-July 1960 licensed Creative Telefilms to distribute 110 pictures from its post-1948 feature library, which was expected to bring in about $10 million, with another estimated $10 million to come after Creative Telefilms recaptures its initial cost.

Another kind of hidden asset value is the valuable real estate holdings of most picture companies, some of which are located right in the heart of the movie capital.

In October 1960, for instance, Twentieth Century-Fox Film Corporation completed the sale of its 265-acre studio property in Los Angeles to Webb & Knapp for $43 million, equal to almost $20 a common share in the Fox stock.

The funds thus realized by Twentieth Century-Fox were used for the purchase of company shares in the open market, which should mean increased per-share earnings. Per-share asset value of the Fox stock was estimated at over $70 as of Sept. 15, 1960, against only $37.69 at the1959 year-end.

Quite a few other movie makers, including Warner Brothers and Metro-Goldwyn-Mayer, have bought their own stocks on the open market to increase the value behind each of its shares. In the case of Warner Brothers, asset value per common share rose from $23.36 in fiscal 1958 of fiscal 1959's $31.80. Since the fiscal-1959 year end, the company has bought more of its stock, which should further increase its per-common- share book value.

Solid asset values are also found behind most theater companies' shares. For instance, as of Aug. 31, 1959, the fixed assets of Loew's Theaters, Inc., which was spun off from the moviemaking Metro-Goldwyn-Mayer arm of now-extinct Loew's, Inc., amounted to $59.8 million, less depreciation. However, the market value of these assets is estimated at $80 million. At fiscal1959 year end, value per common share stood at $22.54, s compared to a considerably lower market price for its stock during that fiscal year.

Though a company's book value or asset value has become less and less a factor in determining the market value of its stock, assets are important if they are relatively liquid in content.

L. F. Rothschild & Co. found that to be the case with Paramount Pictures. Paramount's "other asset" value per common share alone was estimated at between $50.85 and $60.20 against the stock price then, approximately $52.50.

Not accounted for, according to the Rothschild study, were Paramount's "basic earning asset" (motion picture production), the "growth possibilities" in its Automatic Division, which has developed new techniques in data storage and retrieval believed to have interesting military potential and whose sales have increased at an annual rate of over 100 percent in each of the last few years, or "the tremendous potential" of both its Chromatic and International Telemeter Divisions.

As leader in the current drive to subscription TV, International Telemeter could have a good share of a market believed to be staggering in potential. Equally tremendous is the potential of the Chromatic Division whose Lawrence color television tube may well hold the key to success in low- cost color television!

As this historical piece demonstrates, the glamor of Hollywood often spells success for smart investors.

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