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Non-Tech : Lunn Industries (LUNN)
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To: Ken W who wrote (1255)10/13/1997 10:07:00 PM
From: Craig McNeill   of 1436
 
What am I missing here ? It seems rather
simple to me, so I thought I'd come out of
lurk mode to make sure that my logic is not
terribly flawed:

1) Lunn as standalone at current qtrly
run-rate is on track to make $.08-.10 net
income per share. Take a std industry PE ratio
of 18 to 22 and you get a price range of
$1.44-2.20 a share. Lunn shareholders own 100%
of this.

2) Newco net income per share may range from
$.85 to $1.00/share. Lunn shareholders only
own 26% of this, or $.22 to $.26 per share. At
18 to 22 PE this values the stock at $3.96 to
$5.72 a share.

3) Since I can buy Lunn today for $1.40 I can
potentially get $3.96 to $5.72 tomorrow out of
the Newco. Now the timing of all this is
uncertain, but given current market conditions
and the fact that there are unannounced
contracts (according to this thread) gives me
confidence that the downside is low, and the
upside is high.

All this talk about reverse splits has
confused people on this thread. TPG
shareholders are the one's doing the
"reversal". They are willing to merge into a
firm where they bring about 85% of the
revs&income to the party, but only take 74% of
the stock. And that 11% ownership difference
is the premium that TPG is willing to pay Lunn
to merge and go public.

As RB says, time to back-up the truck.
Long on LUNN. cm
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