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Dear Mr. Berko:

Dear H.T.:

When movie theaters advertise that a film you want to see begins showing at 7:15 p.m., that’s a bald-faced lie. Don’t rush, scurry or hurry to be there at 7:15, because you’re going to twitch and itch through 20 minutes or more of pulsating, high-decibel, ear-splitting advertising before you and the rest of the audience will be allowed to view the feature film. National CineMedia Inc. (NCMI-$13.81) is a company you love to hate because it is responsible for those grinding, nettling 20 minutes.

NCMI runs the largest digital in-theater network via joint ventures with AMC Entertainment, Cinemark USA and Regal Entertainment Group, the three largest theater chains in the galaxy. The network comprises 1,400 theaters with 17,300 screens in 46 states that catered to 700 million viewers in 2008. NCMI develops, sells and distributes the branded pre-feature entertainment advertising programs that flicker across 40-foot movie screens. The ignominy is that we pay to watch this advertising designed by ABC, Turner Broadcasting, A&E Television Entertainment, Sony, NBC, Disney Studios and Warner Bros.

All this hoopla is transmitted by satellite to digital projectors installed next to the projectors that show the feature films. This allows theaters to customize advertising to their audiences by film and location. Today, a chiropractor in Sun City, Ariz., can advertise his or her services locally at the same time the owners of a tanning salon in Sarasota, Fla., locally advertise theirs. Because it costs just nickels for the theater owner to show these advertisements, the revenue is quite attractive.

That kind of advertisement is one reason theaters have been able to keep ticket prices reasonable. Of course, $6 for a large bag of popcorn, $3.50 for a box of Milk Duds and $4 for a Coke helps to keep ticket prices down, too.

NCMI’s advertising messages also extend to theater lobbies via a sight, sound and motion network of high-definition plasma screens that reach an audience beyond the theater auditorium. These numerous plasma screens run a loop of five branded entertainment pieces from the company’s “content partners,” with commercial units running between each segment. What a deal!

I don’t like companies that charge you for listening and watching their advertising. It is kind of like telemarketers who call your cell phone so you pay for the minutes they use in connecting to you — that is, if you have forgotten to call the National Do Not Call Hot Registry.

NCMI’s 2009 revenues should come in at $373 million, up from $369 million in 2008. NCMI trades at 33 times 2008 earnings of 42 cents per share, but expects to earn 63 cents in 2009. That means the shares also trade at 22 times 2009 earnings — rather high in my book and this market. And, yes, the dividend of 64 cents per share offers an attractive 4.6 percent yield, but that dividend represents 150 percent of 2008 earnings. That bothers me. NCMI’s $810 million debt exceeds its $583 million market cap by $227 million, which also bothers me. Operating margins are a darn nice 47 percent, but net profit margins are a niggardly 4.6 percent. That also bothers me.

Eight analysts follow NCMI. Five of them have a “strong buy” rating on the stock, and three have a “hold.” In the past 12 months, NCMI traded between $5 and $21. Although most of Wall Street believes NCMI can in the next 12 months run up to the $20 level, which is 32 times earnings, I feel at 18 times 2009 earnings NCMI is fairly priced at $13.81. Therefore, I would not buy 300 shares.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@comcast.net. © 2009 Creators.com