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Some information
The current CEO, Serge Tchuruk, has excellent reputation. All the companies he went through got drastic recoveries (Orkem, Total).
He is known to be very demanding, and first to himself. He 's not the kind of guy who would take the seat and enjoy sitting.
He defined his attitude for ALcatel as "offensive".
And indeed, he accomplished a lot in two years.
And he is extremely shareholders-oriented.
There is a little information on what he did on their web site, in the annual reports.
I just bought into Alcatel at 34. This stock has seen a 50 % increase in recent months. I think it will go on because it will get rid of their non telecom participations and activities. This has already begun and will go on.
With 4.7 Billion F results, and the stock at 34 $ on the US market (ALA), the PER is currently 39.
This might appear expensive.
But in fact the operational income before tax is 8 Billion F.(against 2.9 in 96)
Given the current growth rate of the different segments, the expected income for 98 is at least 11.5 B $ if everything keeps comparable.
If we keep the current extra costs:
financial (1.1)
restructuring (1.2)
other revenues 2.2
taxes (3.3)
This gives us 8.1 (excluding goodwill stuff, not pertinent).
So a PER of 22.6. This is not so expensive.
But that's not the reason why I am buying Alcatel.
To be honest, I made this calculation 3 weeks ago (before the 38 % rise in the stock) and concluded that this was not cheap enough so did not buy (wrong decision, is'nt it?).
Why I buy now is because Alcatel said he would get rid of its non telecom business: GEC alsthom and Systems. The first is industrial, and has few growth potential. The second has weak earnings.
Now we can valuate Alcatel with at least a PER of 30, because it is the leader in a 17 % growing industry.
Alcatel will be slimmer: around 150 Billions F end 1998. And with no more financial losses
This could give 9.2 Billion F FY98.(excluding goodwill)
So EPS (excluding goodwill) of 54 F
With a PER of 30, this is 1620 F
So a 50 % increase on today's price, merely due to the adjusting of the PER to the new activity of Alcatel
P.S: for those worrying about Asia implications: it is only 5 % of Alcatel sales
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