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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (25311)11/20/2006 11:07:07 PM
From: Spekulatius   of 78670
 
re WLT, MWA. I basically regard WLT as a cheaper way to get into MWA. I like MWA's prospects and plan on holding my spinoff shares.

MWA looks expensive based on current PE but a closer look reveals that it's cheaper than it looks. MWA current earnings are depressed by a high tax rate (66%) and some extraordinary expenses as well as amortization expense (28M$ annually). the amortization expense is not transient but i tend to add those back into earnings anyways since they are non-cash. The EV/EBITDA is around 8 which is a moderate valuation. Merger synergies and lower raw material prices (copper!) may help improve earnings going forward. We should receive MWB shares with more votes which should trade at small premium to MWA shares. I think the stub may get under pressure after the spinoff more so than the MWA shares.
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