Let's take another view of the Loral "stub" valuation. This is in regards to all of Loral excluding G*, which has a value now of roughly $4 billion. We will use a peer--PanAmSat(SPOT). SPOT currently has a value of $8.1 billion. They have, if memory serves me correctly, 16 GEO sats in orbit, with an expansion underway. Their business would be comparable to Skynet and SatMex, less so to Orion, and nothing like Cyberstar. If we go out to
the year 2000, Skynet/SatMex will have 9 GEOs, Orion 3, Cyberstar 3, and Europe*Star probably 2. I am going to assume a similar valuation to SPOT at that time. The reality is that Orion, Cyberstar, and most likely Europe*Star should have a much higher relative valuation than your basic sat purveyor of video services. But, for ease of valuation and a built-in margin of safety, assume a similar method of valuation. If the market gives the "stub" a
valuation of $8 billion at that time with roughly the same number of GEOs in orbit, then it will have a value of $28.57. Add G*'s value(it would be approximately the same as the stub value at that point) and you come up with an extremely conservative "back of the envelope" price target of nearly 60 sometime in 2000. That is a 33 to 55% annual return depending on if it reaches that point at the beginning or end of 2000. What is the current
value of the stub? Well, discounting $28.57 back to the present gives us 23.98. Add the $11 value of G* at present and 35 is your current value. Remember , this is an extremely crude approximation, but it does allow one to see that there is value in this company. |
