Respectfully, VMan, I think your analysis has a few weak spots. Though I'm very long on Loral/G*, my position is based on the hope of the company actually making a net profit in the not too distant future, not on a multiple of EBITDA. And G* will either make a big positive--or negative--contribution to that net; if G* fails, I don't think the EBITDA from Skynet, SS/L and the rest will make much difference.
As far as EBITDA multiples, when you compare EBITDA multiples of other companies, do you take into account what their depreciation and interest expenses are relative to Loral's? I believe that, assuming reasonable G* success, Loral's EBITDA will start generating net income by 2001, but the path there is a little obscure and risky. To the extent an investor doesn't see the path or think's it high risk, why should he pay any multiple on EBITDA?
What is SS/L worth? In CY98 it generated 107M$ EBITDA and I don't think we know how much of that would have flowed to net profit. And I don't see SS/Ls profitability growing very fast. There's actually fierce competition in the sat mnfctg business and if anything an oversupply of capacity. And I don't see why it should matter to an investor how much it would cost to duplicate SS/L: what matters is how much money it makes, either directly or by spinning off good new businesses. If you believe G* or C* will make money, and/or SS/L has a chance of generating other good new ventures, then SS/L is worth a lot. Otherwise, not.
Regards, RS |
