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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (12926)	9/5/2001 4:59:27 AM
From: Bob Rudd	of 78746

MTP: I don't have a dog in this fight, but ran across this from a 9/4 Merrill report: "We have adjusted our Montana Power estimates to remove $100MM of Qwest revenue starting from Q4 2001E. We have lowered our telecom revenue estimates from $569MM to $544MM in 2001E and from $658MM to $558MM in 2002E. We have lowered our EPS esitmates for 2001E from $0.85 to $0.84, and for 2002E, from $0.42 to $0.16. Note that we assume the utility divestiture closes at end 2001E." "Despite a low EV/EBITDA for 2002E of 3.1x, on the lower estimates, Montana Power’s P/E of 44.0x for 2002E and 31.5x for 2003E are unattractive for apparently rising risks in its transition from utility to telecom services provider, in our view." Beyond that, the analyst thought MTP v Quest ongoing disagreements would be unfavorable going forward. They maintained a 'Neutral' on it. I find it strange that the '02 EV/EBITDA is so low with the PE so high and the earnings dropping over 60%.

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