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Technology Stocks : Advanced Fibre (AFCI) ** IPO
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To: E_K_S who wrote (1897)3/2/1999 9:40:00 PM
From: E_K_S  Read Replies (4) of 3299
 
More on the GEC's Reltec buy out....

GEC Buys Reltec For $2.1 Billion
(03/02/99, 6:42 a.m. ET) By Reuters

General Electric Co. of Britain, moving quickly following the sale of its former core defense business, bought Reltec of Ohio, a closely held telecommunications equipment maker, for $2.1 billion Monday.
(http://www.techweb.com/wire/story/reuters/REU19990302S0001)

From the article:"..."What we announced today is the first of hopefully what will be a series of acquisitions in this field," Simpson said..."

From the article: "...At twice Reltec's annual sales, which have grown at more than 20 percent a year, the price was "good value," Simpson said..."

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AFCI's sales are $4.11/share....equivalent price $8.22 + 1.37 cash = $9.59.

The key in this analysis is GEC used a Price/Sales analysis for their valuation. AFCI should be valued by the street at 2x sales and therefore any new contract obtained could be worth $2.66/share for each $100 million value in new contract sales.

Any large RBOC contract will add immediate value to the share price....any lost contract sales will reduce share price accordingly down to book value of $3.44 (per share cash value is now at $1.37).

IMO still a speculative buy at this time. It is interesting that the market now values this industry at 2x's current sales.

EKS
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