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Technology Stocks : Loral Space & Communications -- Ignore unavailable to you. Want to Upgrade?

To: Mr. Adrenaline who wrote (1803)	1/30/1998 11:09:00 AM
From: Snake	Respond to of 10852

A good article in WSJ. It looks like someone actually thought before they wrote this one. Key points include SS/L only accounts for about $3 of LOR stock price and the oppenheimer analysts indiciating Loral could take an equity position. After all, the entire SS/L was valued at around $760 million when Loral increased ownership to 100%. Loral Space Halts Work on Satellites For 2 Asian Clients ---- By Frederic M. Biddle Staff Reporter of The Wall Street Journal PALO ALTO, Calif. -- Loral Space & Communications Ltd. said it has stopped work on three satellites for Thai and Indonesian companies and plans to lay off workers, the first clear signal that U.S. satellite concerns are vulnerable in Asia's economic crisis. Analysts predicted a relatively small impact on Loral's earnings, and the company said it believes it can find new buyers for the satellites if necessary. But the company said it will eliminate as many as 300 jobs, or about 9% of the work force at its Space Systems/Loral unit. Asia's satellite business "is going through a predictable and inevitable adjustment in its growth rate," Bernard L. Schwartz, Loral's chairman and chief executive, said in a recent interview. But despite the region's recent woes, the industry impact will be limited and U.S. players still see the Asian market for satellites "as an opportunity, not a negative." "After the smoke clears, [Loral] may end up taking an equity position" in one of the stalled projects, said Marc Crossman, analyst for CIBC Oppenheimer. Loral's layoffs follow the decision by Asia Broadcasting & Communications Network Public Co., Bangkok; and P.T. Pasifik Satelit Nusantara, Jakarta, to suspend the orders. Two Thai and one Indonesian satellites were to be delivered this year and next for such applications as satellite television. "The exposure's limited, and there's plenty of opportunity for Loral to utilize these assets as they're sitting dormant," said Robert B. Kaimowitz, managing director of C.E. Unterberg, Towbin. If the Asian customers don't restart their orders and Loral can't find replacement buyers, Systems/Loral might lose $400 million of $1.8 billion in anticipated revenue this year. The unit has a $1.8 billion backlog, excluding the halted satellites. Loral's migration to satellite services from construction also is expected to cushion the Asian-order difficulties. Citing Loral's dominant space-services business, Mr. Crossman told his clients yesterday that satellite-building accounts for only $3 of Loral's stock price. In New York Stock Exchange composite trading, Loral shares closed down $1.4375 at $22.125.

To: Mr. Adrenaline who wrote (1803)	1/30/1998 11:13:00 AM
From: Valueman	Read Replies (1) \| Respond to of 10852

Don't despair Mr. A! Be thankful that there are willing buyers out there at higher prices.(I must admit I too had orders in at the same level!) I posted this over on AOL but it is worth repeating. Let's look at the big picture. Loral drops from roughly 24 to 22 before being halted on speculation of a layoff and loss of Asian business. That is 8.3%. If Loral is unable to do a thing with these birds and takes a $400 million hit, they will relinquish $30 million in EBITDA. The multiple on that, by the way, would be far below 10. Thus, as was mentioned by Shades1500, take off 1 to 2 points for the loss of this business. Any more than that, and Mr. Market is offering up a perfect pitch. If Loral was worth 24 a couple of days ago, and we know the absolute worst case for the loss in value, we can safely say that anything below 21 1/2 or 22 is a gift. The street does not take into account the fact that SS/L EBITDA margins are 7.7%. Skynet will have 1998 margins of 68% plus. So, to lose $400 million in revenues at SS/L is not that serious. It hurts, don't get me wrong, but it is far from lethal. Skynet can generate those same EBITDA numbers on an increase in revenues of $46 million. That is a 25% increase in what is projected for Skynet, without adding in any gains in Orion or SatMex. Remember, Skynet/Orion/SatMex have the possibility of doubling and in some cases tripling revenue per transponder. Loral estimates for SatMex assume 62% utilization, as does Orion's estimates. There is a lot of room for making up this shortfall using very high margin businesses. I am assuming the worst case when they take the hit--I fully believe that they will NOT take that hit unless they get completely pimped around by the Laotian government for an extended period.