Yup, favorable indeed. It's her top pick and she's had a boffo record. Here's the part of the Barrons interview she devotes to Loral and Globalstar (plus the intro. paragraph):
Q: Let's talk about your stock picks. What's to like about Loral Space &
Communications?
A: We've owned Loral for quite a while. But we are particularly interested
in it, given the recent correction the stock went through. The old Loral was
a great stock for a long time. The new Loral has the same management,
with a proven record of acquiring and managing businesses. They are
building a diversified pure play in satellite communications. The
commercial-satellite business is really blossoming. Loral has a core
satellite-manufacturing business, which is somewhat mature. But they
have acquired a lot of earlier stage companies that are growing quickly.
They've built a portfolio of satellite-service companies, mostly
transponder-leasing businesses. They acquired Skynet Satellite from
AT&T. They acquired Orion Network Systems, whose data-networking
expertise is used in satellites. They acquired an interest in Satmex, which
the Mexican government recently privatized. Europe Star is a European
satellite-transponder lease business.
Q: What can they do that the previous owners of these businesses
couldn't?
A: You have a lot of future growth and revenues as more satellites are
launched. A lot of these interests have only recently been acquired. AT&T
had made the decision not to operate internationally with Skynet. That
really hobbled the company. PanAmSat, a competitor, did phenomenally
well in acquiring and launching satellites overseas. Transponder lease
rates are higher overseas. Loral intends to merge all these entities and
continue to acquire and lease transponder space on a worldwide basis.
Q: You got into Loral because of Globalstar Telecommunications, another
satellite company.
A: Loral owns 42% of Globalstar, which is going to be launching a
constellation of low earth-orbiting satellites that will be used for mobile
phone service. Bernard Schwartz, the CEO of Globalstar, is also the CEO
of Loral. Globalstar is worth about $8 per Loral share. It will cover the
entire world. Globalstar has a great economic model. Once the company is
up and running, you should see very, very high margin levels. It's just a
cash-flow machine. Sure, there are various risks. But the nice thing about
owning Loral is that you are much more diversified. And our price target
on Globalstar is about $50 a share, almost double where we are now. But
our models for Loral for next year, we're assuming Globalstar is worth $8
per Loral share, or just where it is now. Globalstar should generate
revenues next year. Loral also owns Globalstar service-provider rights in
Canada and Mexico. They get a management fee from Globalstar, which
we haven't included in the model. They also invested in a project called
Cyberstar, which will provide worldwide data services.
Q: That sounds like a lot of costs. Loral recently hit up shareholders for
fresh capital.
A: That and the attacks on satellite exports to China are why Loral was so
weak recently. China should blow over. We believe there will be no
significant liability. And yes, Loral is acquisition-oriented, and will need to
fund future spending. But you have to think about the returns and whether
they can generate higher returns on capital than you'd get otherwise.
The sum of Loral's parts really underestimates the value because it
doesn't account for all the synergies. They are going to be adding to the
value. Just take transponder leasing. If you can go to a broadcaster and
not just offer distribution for their cable signal in the U.S., but also
transport it from new York to London, distribute it in Europe and Latin
America, then you are a more important provider of services. You become
almost a strategic partner to that broadcaster.
Q: So, what's it worth?
A: The asset value of all the parts is about $32 a share
at yearend '98. That assumes Globalstar is flat. Next
year, we can look at an asset value of about $40 a
share. Even if Globalstar doesn't double you can still
earn a good return. The largest single piece is Skynet.
We value that at 11 times forward EBITDA [earnings
before interest, taxes, depreciation and amortization],
or about $10 a share at the end of '98. Orion at 11
times EBITDA is about $4.50. Compare that to
PanAmSat, by the way, which is also at about 11 times
EBITDA. Globalstar at its current stock price is about
$8 per Loral share. Space Systems/Loral we value as
a mature manufacturing business, so at one times
forward sales it's about $4.50. |
