Businessweek Archives

A White Hot Glow From Tiny Lamps

Inside Wall Street


When Chicago Miniature Lamp (CHML) decided in early August to buy a company four times its size, some investors weren't thrilled. They saw snags in integrating Switzerland's Sylvania Lighting International. Chicago Miniature's stock dipped in mid-August. It has since moved up, following a closer look at Sylvania's potentials. It closed at 30 on Nov. 11.

"In fact, it's a very attractive acquisition," says Robin Kerr of Axe-Houghton Associates in Rye Brook, N.Y. The addition of Sylvania, with $600 million in sales--75% of it in Europe--makes Chicago Miniature the fifth-largest lighting company in the world. And the growth potential for Chicago Miniature is huge: Sylvania's meager 2% profit margins could be improved, says Kerr. Chicago Miniature makes small light bulbs, ranging from power-on indicators for outfits such as Black & Decker to sophisticated lighting assemblies for such blue-chips as United Technologies, AT&T, and Ford.

Analyst Keith Mullins of Smith Barney says the combination provides big opportunities for product cross-selling and profit margin enhancement.

Analyst John Mahoney of Raymond James & Associates in Tampa estimates that every 1% rise in margins at Sylvania will mean an extra 24 cents a share in yearly earnings. Given the size of Sylvania and its operating profitability, he notes, Chicago Miniature should have earnings power "above our current estimates of $1.55 for the year ending Nov. 30, 1998, and $2.15 in fiscal 1999." He figures the stock, now at 30, is worth 46 based on his estimates.BY GENE G. MARCIALReturn to top

Return to top

Cash Is for Losers
blog comments powered by Disqus