(LVLT) - Level 3 Communications Message Board

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Technology Stocks : (LVLT) - Level 3 Communications

LVLT 53.63

0.0%

Nov 1 5:00 PM EST

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To: craven moorhead who wrote (547)	3/27/1998 3:55:00 PM
From: Larry Fowler	Read Replies (3) of 3873

An operating telcom (which this is by the way) should sell for between 6 and 8 times book value.. If the board feels that the book value is $11.65 (and they should know) the value of the stock is between $70 and $93 per share.. And this is not 1920's thinking.. It recognizes the fact that assets should earn a return. If they don't then the company has no business spending its cash to buy them. (By the way.. $11.65 is probably the book value before selling off CalEnergy, etc. and $2B infusion from the Construction business. We know they currently own $3B of cash, PKS Info Sys, Coal Properties plus RCNC, CABL, and CTCO stakes.) What we are buying into is the assumption that the company will be able to acquire enough assets, without diluting our stakes, to generate $3.50 to $4.50 per share in earnings. That amounts to a 4% return on assets of $12,000,000. (3Bof cash plus 9B of debt). Or an ROE of 17%. There is nothing unreasonable about that, especially in a growth industry like IP telephony. Larry Fowler

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