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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: LindyBill who wrote (22609)	4/12/2000 11:38:00 PM
From: Dinesh	Respond to of 54805

Lindy True, last 5 years have only been red ink. Now, many things are happening simultaneously to fatten the hose and improve the quality of processing at the consumer end. To put things in perspective, only in 1994 (or 93 ?) a 66 MHz 80486DX2 was a pretty good computer, and a 9600 baud was a pretty good modem. Now, you can have free DSL from ETrade. A VCR quality program can be squeezed in about a 1Mb pipe. HiFi will probably require some more. 1Mbps doesn't sound like a lot to me. These collectively make me consider that download and play may be a stopgap solution but buffer and stream is the future. HLIT for example is busy building bandwidth for cable users, and can't seem to fulfil the demand (there was also a HUNT report on HLIT a while ago). (Now it is acquiring Divicom from C-Cube - a digital video compression thingie) The excitement of future lies in its possibilities. My bet is that I'll live to see a home stage in my lifetime. Of course I can't lose on this bet ;-) Regards Dinesh

To: LindyBill who wrote (22609)	4/12/2000 11:56:00 PM
From: wopr1	Read Replies (1) \| Respond to of 54805

GMST Valuation: NY Stew posted a good report on GMST. It had this valuation, which I did not understand. Could someone please help? BTW, I'm stupid, so please be gentle. :) o $110 price target. We believe Gemstar's worldwide advertising/e-commerce business can be generating over $4 billion of advertising operating income in 5 years. We conservatively assume zero value for the e-book business, TV Games network, VCR+ (currently an estimated $70 million of EBITDA) and TV Guide's Entertainment Group and United Video group (estimated $335 million 2000E EBITDA excluding the EPG) and no interest income. The company is projected to generate after tax EPS (before goodwill amortization) of over $6 per share in 2005 growing at 100% per year. Assuming a 50 multiple and a 20-25% discount rate leads to a $100-123 price target. Taking the mid-point, our price target is $110. Questions 1) $6 EPS: To arrive at this number, it seems that they are only counting the EPG's and advertising, or is it just advertising? They excluded e-books, games, vcr+, etc. While excluding these items, they acknowledge that some of these areas earn money, ie $70 million and $335 million. Thus the estimate is very conservative, is that correct? a) How did they arrive at the $6 figure? They did not seem to support the $6 EPS. 2) $6 per share in 2005 growing at 100% per year: This is a grammatical question. Does this mean at 2005 they expect GMST to still be growing at 100%, or, to arrive at the $6 figure, they are assuming 100% growth for the next 5 years? 3) 50 multiple: I assume that means they expect a P/E of 50 at 2005. 4) $100-123 price target: Even given these fancy numbers, I don't know the formula to arrive at the price target. Second, is this their 2005 price target? I guess I could go on, and on. Given this week's blood bath, I could use a good lesson on valuation (if you could not tell). Thanks. -wopr