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Strategies & Market Trends : Value Investing
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To: Madharry who wrote (39703)10/16/2010 9:32:35 AM
From: MCsweet  Read Replies (1) of 78742
 
LIA,

If the deal goes through, I like the LIA. Based off of my "proprietary model", I am estimating over $12 worth of LIA stuff for $10.50 worth of LIA. I always go for the discount.

Based off of recent stock prices and exchange rates, you get
$0.50 USD in cash
1.5 Grupo Prisa = 1.5 x 1.77 x 1.3979 = $3.71 USD
3.0 Grupo Prisa Mandatory Convertible = ???

A conservative (and poor IMO) valuation of the convertible is the value of the stock. That gives 3 x 1.77 x 1.3979 = $7.42 USD for a total value of $11.63. Even for that much, I think LIA is worth the investment.

I think the convertible is worth more. It has a 0.175 EUR dividend (assuming company makes enough money to cover it) and converts into the greater of 1 Prisa share or $2 Euros worth of Prisa shares in 3.5 years (up to 1.33 Prisa shares max). Therefore, using my sophisticiated option and NPV modeling ;) I put a value of at least $2 EUR on it. That gives 3 x 2 x 1.3979 = $8.39 for a total value of $12.60.

I'd love to hear comments/criticisms on my valuation and point out that these values will change daily with the Prisa stock price and the Euro exchange rate. Anyone reading this and thinking about buying, I'd recommend you go through the Grupo Prisa shareholder presentation filed by LIA on 9/7/2010 and do your own valuation study.

MC
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