In their previous report, Bear Stearns valued LDP at 2x projected year end book value of $50.
A couple of points regarding that report:
1) Without actually going through the numbers, I believe the $50 year end projection has already been surpassed, or is very close. And that does not include SABA and NUFO, whose IPOs will be completed in the first half 2000.
2) For comparative valuation, Bear Stearns used ICGE, CMGI, and SFE. They noted that these companies range in value from a low of 8x to a high of 30x book value. Bear Stearns then gave LDP an extremely conservative 2x multiple, arriving at their price target of $100.
In light of the recent events: year end report with much higher earnings than that estimated by Bear Stearns, the NUFO filing, the very strong growth in the core business, the possibilities presented by Mayan, Silicon Spice, and others in the pipeline, et cetera; what would be unreasonable about giving this company say a 4x book target. That is still only one-half the multiple given to the least multiple on any of the other three. I think the potential of LDP, with its small cap status, and possessing an ownership interest of say 8-10% of a few companies that could potentially reach market caps of 3-10 billion warrants at least a multiple of 4x doesn't it. I'd like to see Bear Stearns just say, what the hell, we're having an increasingly difficult time finding any sound reason why this is not worth 4x projected book, or one-half the multiple of the least valued of the others.
4x times a year end target BV of $60 (probably too low) would still give a target of $240.
Yes, this is somewhat simplified, but no one including Bear Stearns is really breaking out the earnings of the non-VC businesses and putting a proper multiple based on the growth of those divisions.
Perhaps another way to look at this whole picture is to view the company based on its earnings. How has it grown? Consider if the company merely reported the following earnings year over year for the next four years: 1.00 then 2.00 then 4.00 then 8.00. This is $15.00 in earnings and is still less than LDP last year. What would you guess the multiple of that company's earnings would be? It's food for thought, but it doesn't end there. Let's say for 1999 and 2000, LDP does earnings for the combined two years of $38.00 or $40.00. So.....one third the market value of the entire company is earned in two years. Where else can you get that, esp. in something involving technology?
Have a good week everyone. |
