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Strategies & Market Trends : Value Investing

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To: Bob Rudd who wrote (13148)	10/1/2001 2:02:30 PM
From: Brendan W	Read Replies (2) of 78680

The Limited. Bought The Limited (LTD). The LTD story is somewhat involved and I will describe it in shorthand. PM me any questions about the shorthand. In order to follow the story you need to know what LTD owns. In other words, this post needs to be read in conjunction with an understanding of LTD. Also, my assumptions are intended to be conservative. If errors are found, please advise. FYI, LTD yields 3% on a 30 cent dividend. LTD’s debt is rated baa2 by Moodys. My investment rationale (contrary to the Motley Fool post here: fool.com is that when buying LTD one is buying Intimate Brands (IBI) at a 33% discount, not buying Express/The Limited/Lerner/Structure. IBI is Victoria’s Secret and Bath & Bodyworks and is valued by the market as LTD’s mainstay. The 33% discount puts approximately a 9 PE on LTD’s IBI stake. IBI has not had a good year and the events of 9/11 are not going to make it better. IBI has a PE of approximately 13 on 1/2002 earnings but the earnings must be suspect. My accounting for the 33% discount is as follows: LTD market cap 4072 less: surplus cash -300 less: value of non-IBI revs -1000 less: publicly traded stock -323 Cost of LTD's IBI stake 2448 Market price of LTD'S IBI stake 3638 % discount 33% The market cap’s I calculated as follows: Shares/ price/value ltd 428.6 9.50 4072 ltd's ibi shares 404.235 9.00 3638 ads 14.7 16.25 239 chrs 8.7 4.91 43 glyn 3.9 10.67 42 total publicly traded stock 323 The surplus cash was calculated as follows: Current Assets 1900 Current Liabilities -1000 Long Term Debt -250 Long Term Liabilities -223

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