Vanni, Your point well taken. However CREAF has fallen from $28.50 to $17.50/share or about a 40% drop in price when their earnings estimates going forward have only been trimmmed about 5% say by ML. You are correct- there is in the market a corollation between earnings growth going forward and share price. But CREAF is not a high fixed-cost producer say like a semiconductor equipment company (i.e., you cannot fire a machine during a downturn), and the bottom-line value of its franchise is being hdden in all of these earnings revisions disputes.
But even with flat earnings for a period, from a financial/corporate perspective you need to consider the "going concern value"/share too. That going concern value however you compute it, acts as a floor upon the share price..... IMO that's what's going on here.
Upon that I went through at lunch last week and toted up the various things which have changed in the last quarter for CREAF such as the Asian Crisis, the 3DFX deal,the three acquisitions, the Asian currency devaluations, the EMU chip announcement. I rated each of these events on the short-term either "good,bad, or neutral" for CREAF.
And I came to the conclusion that Sim Wong Hoo has changed CREAF a bunch in the last 90 days.... And that reflects in the going concern value for CREAF.
Sincerely,
Doug F. |
