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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Investor2 who wrote (16162)	1/13/2003 9:31:22 PM
From: Bob Rudd	Read Replies (1) \| Respond to of 78594

I2, Thanks. I've read both reports. Of the 2 analysts, I suspect the Lehman guy has studied RPM closer [and was thus already aware that most of this disclosure had been made in prior Q's - a fact he pointed out in an additional report today looking at current Q]...as indicated by the 20 pager he put out in late October. The JPM guy is more typical of investors that pushed the panic button - surprised by something that was at least partly disclosed in the filings[Do they read the filings?]. Merrill was also aware of the issue and maintained a Buy - here are some of their excerpted comments: * We knew RPM’s insurance would be running out in the next 1-3 years and today the company said there was a reasonable probability that it would run out in 04. * In addition, RPM discussed a GROSS OUTFLOW OF CASH RELATED TO ASBESTOS; roughly $30mil/year Vs its previous historical average of roughly $15mil/year. We think investors are concerned that the cash outflow will be greater than anticipated and perhaps sooner than expected. * While this news is worse than we thought, we had still factored much of this happening into our assumptions. * Cash flow and the balance sheet at RPM remain strong, in our view. The dismissal rate of cases is very high and the actual number of cases has declined. We continue to HOPE FOR A LEGISLATIVE SOLUTION, which might make this situation dissipate, before RPM’s insurance runs out. * We are lowering our 04E EPS by $0.05 to $1.10 assuming the company insurance runs out midway through the year. * We reiterate our Buy rating and think valuation is attractive, particularly on this weakness.[End excerpt] [The LARGE CAPS are mine - I use that the highlight stuff in text files] Lehman took 04 down to 1.00 based on full year exposure and no relief. Part of the reason for the difference in opinion may be that some overlook that RPM's disclosed asbestos exposure is due to small retail packages of bondex patching powders 2# packages and such - not in the same league with insulation and similar exposures that took down many companies. Offsetting the somewhat more negative asbestos disclosure was disclosure on the call that the EITF suits were coming to a resolution that was not seen as material - This, to me, was as important as the asbestos and quite a positive offset.