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Technology Stocks : Globecomm Systems (GCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Howard C. who wrote (62)	1/12/2000 10:18:00 AM
From: Valueman	Read Replies (1) \| Respond to of 66

ING Barings Report Globecomm Systems, Inc. - ATTACHED Buy Raising Price Target to $36 - We could see potential partners - from the likes of internet infrastructure industry and satellite space segment industry. ú Raising Price Target on Higher NetSat Valuation In our initiating coverage report on December 8 1999, we valued the NetSat subsidiary at roughly $300 million. We believe that we underestimated the value the market might be willing to pay for a broadband enabler. As such, we are raising our valuation on the Netsat subsidiary to $800 million, which significantly impacts our Globecomm valuation and gets us to $36 per Globecomm share. ú NetSat Could be Spun Out This Year, Unlocking Value for Globecomm Shareholders. We believe that NetSat will likely be spun out of Globecomm sometime this year, which will give us our ultimate valuation of the subsidiary. Additionally, we believe that several strategic partnerships at both the NetSat and Globecomm level could further enhance shareholder value. ú Raising YE2000 $36 per Globecomm Share - SPOT Supports our Thesis. We are raising our Y/E 2000 target price to $36 from $23 as we believe it is clear that investors are willing to pay up for companies that can support the rapidly expanding demand for data via satellite. ú For example, PanAmSat Corp.~ (OTC: SPOT-70, Buy), has risen to $70 from $40 since the beginning of November in anticipation of its roll-out of an Internet strategy. Currently we estimate that SPOT shares are trading with an implied WACC of 10%, significantly lower than what we have used to value NetSat. ú Accordingly, we have lowered our WACC to 17.0% from 22.5% while maintaining our 6.0% terminal growth rate to reach our new target price. These new valuation parameters indicate NetSat Express's total YE2000 estimated valuation could be roughly $800 million. ú However, if the Globecomm subsidiary is able to meet its financial targets we could foresee a valuation for for NetSat with a $3.0 billion valuation if we were to use a 10.0% discount rate, a level consistent with PanAmSat and EchoStar Communication's~? (OTC: DISH-84, Strong Buy) current levels. ú Strong Partners Support Our Conclusions Several important NetSat partners already have lent financial or strategic support to the company's vision including Globix, IBM, George Soros, and Reuters. With new CEO, Marni Ehrlich, we expect further agreements to reached especially given his experience working at AT&T and with top Nortel management. Valuation We are establishing a $36.0 price target on Globecomm Systems based on our sum-of-the-parts valuation methodology. We value the core Globecomm business at 1.0x revenue, which equates to $77.0 million, the midpoint between our F2000 and F2001 estimates. We subtracted out net debt and added Globecomm's 62.0% ownership interest in NetSat Express to reach our new target price. <<>>