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Technology Stocks : Orbital Engine (OE)

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To: Krowbar who started this subject	3/10/2001 10:10:27 PM
From: Norm. Forster	Read Replies (2) of 4908

Herewith a 'Hypothetical' on the future of O.E. I have been an O.E. shareholder since about '84 and have followed the boards since '96. All numbers are in shares and Aust. dollars unless otherwise stated. I will assume the component supplier is Delphi and the manufacturer is G.M. for the want of not knowing any better. Siemens share of Synerject is for sale at $150 mil. which is in reasonable agreement with the $130 mil. figure from the CIBC report of March 2000 for their estimate of the value of O.E.'s share. I will therefore assume that the rest of their projections are close to correct. The CIBC report valued Orbital at $2.55/share using a 15% discount rate with a 4.6% penetration of the auto. market by 2010. The 2005 income projections for Orbital are:- Synerject:- $30.5 mil. Royalties:- $160 mil. Profit;- $175 mil. BT & $123 mil. AT. i.e. ~35cents/share. Note that auto penetration is probably less than 1% in 2005. Our CEO has reportedly said that post Dec.2000 reporting all the pressure is back on Delphi and he expects agreement before 30 June 2001, but what if he is wrong? Delphi knows what Orbital will accept and can presumably proceed with production so long as they don't supply and just leave Orbital to watch their share price fall. Maybe a marine/motorcycle/2S auto product announcement may help in the interim and maybe not. CIBC licensing projections for O.E. are 2001. $30 mil., 2002. $15 mil. and are zero there after to 2005. So licenses in this period are critical for cash flow. Now Delphi, in US dollars MC ~8.5 bil. EPS 1.94 REV. 29 bil., is looking for acquisitions and maybe Orbital is a consideration especially if the Spark/injector is performing well. What if Delphi thinks the penetration of Orbital's 4S/DI by 2010 will be closer to 15% with their support rather than CIBC's projected 4.6%. I can't understand Siemens, they are giving Delphi a clear run at taking out Orbital and being left out. So I assume they have an alternative or intend to take out a 4S license, or at least an option to have a license, prior to selling. Maybe they know that the solution for 4S is the Spark/injector which they don't have anyway. If Delphi buy 50% of Synerject for $150 mil. they will consider taking out Orbital if the price continues to slide. Synerject adds back about 43cents/share to Orbital(350mil. shares) leaving at the moment 93cent/share which is decreasing by the day. I wonder what price the Australian Institutions will accept if the market price continues to slide. Maybe the Aussie Institutions would consider a private placement to see Orbital through if required. I hope the economic slowdown is over in six months as expected, but even so this is a critical period for shareholders and we can only hope that our management team has the metal and the acumen to see us through to a 4S/DI deal after so many years. I have not put a figure on my buyout scenario but maybe others would like to speculate, perhaps that will keep us amused while the game is played out in the real world.

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