Uncle, I have a simple way to do comparative market valuation for RMBS. Lets look at the whole DRAM market, MU claim that it is or will be 20% of that market now or soon. Under the best circumstances, I see it difficult for MU do bring to the bottom line more than 8.5% of their sales (some will even say they'll have problems painting this line black). Well, lets use MU as a surrogate for the DRAM market, and adjust valuations accordingly, MU capitalization is $16 Billion, you multiply this by 5 since MU is only going to be 20% of said market, and divide by 5 since RMBS is only going to bring down 1.7%, you also divide this number again by 2 to allow for taxes, and guess what you get an "MU adjusted" fair value capitalization (assuming RMBS does nothing but DRAM) of $8 billions, about four times what RMBS is selling for right now. QED.
If you want to assume that RMBS will never be more than 50% of DRAM, you take another factor of 2 and end up with a superconservative "MU adjusted value", nothing but "DRAM RMBS valuation" which is twice current valuation, or about $180/share fair current valuation.
zeev,
oh ya! that is much simpler. clearer too.
i understand the first and the last sentence the best!!!
unclewest |
