RS:
Good points to address:
...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.
If that is the case, then all your money is essentially bet on G*. If it MUST succeed for LOR to be valuable, there is no sense in owning LOR. I have always wanted to be sure that all the other parts had significant value as well. I still think that way.
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?
Companies comparable to Loral, excluding other sat companies, are difficult to find(ok-impossible to find). Cable and fiber companies are somewhat similar in that they require huge upfront capex and lots of debt before the cash flows. Essentially LOR is just another telecom company, but a very unique telecom company. Should we look at PCS, or AirTouch in its infancy? Hard to say.
To the extent an investor doesn't see the path or think's it high risk, why should he pay any multiple on EBITDA?
Why do people buy internet stocks that will never be profitable? Loral's path is far clearer than Amazon or somesuch.
What is SS/L worth? Does it need significant growth to have value? KO is growing very little these days, LU's growth was stunted last quarter, GE grows slowly, IBM grows single digits, HWP shrinks--it matters little to the valuation. These stocks remain at ridiculous multiples. All these stocks are franchises that are difficult to duplicate. Thus, their valuation remains high. SS/L has a franchise value too. It is essential to Loral. It will be essential to ALA someday. If it is not valuable, close it. Farm out the manufacture of sats. Let somebody else's profit margins be squeezed. The true value of SS/L can't be produced through some formula, or a multiple of EBITDA. Otherwise, Schwartz, who is not a stupid man, would have ditched it long ago. Sat manufacturing is extremely competitive. So is almost every other business. Does that make it a commodity? No. All in all, it is very difficult to put a price on it, but it is worth more than is generally thought.
I do indeed believe G* will make plenty of money, especially seeing the sweeping change in thinking that is going on at G* and at the partner level. Thank you Iridium. C* is still a mystery to me. I have never given it any value, and do not see any near term. I am waiting to be surprised. C* GEOs, if they are ever to be built, will be too late to the dance to make any economic difference.
If we step back and look at the very big picture, this discussion is probably pointless. Either the stock goes up or they are bought-period. |
