Here are Readware's latest comments (most of this stuff is on the new FAQ, but it is all spread out there). Maybe I should start a Readware and Valuer column, nah too much work...
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Subject: Re: 1999 $51
Date: Mon, Feb 16, 1998 22:20 EST
From: Readware
Message-id: <19980217032000.WAA02879@ladder03.news.aol.com>
Increase in number of fully diluted shares (b/c of the ONSI acquisition) from 242 million to 280 million is the reason for the slight decline in the price target. You will also, recall, however, that the 2000 target, because of the Orion acquisition, was raised to $76. Orion at that time will have three satcoms fully operational (in 1999 it will have two fully operational), and we expect, at 87-90% usage, with VSAT services completely developed at
that time.
Subject: Re: 1999 $51
Date: Mon, Feb 16, 1998 22:45 EST
From: Readware
Message-id: <19980217034500.WAA07449@ladder03.news.aol.com>
Toothog: On the G* projected numbers and if ours will change with the G* annual shareholder meeting: our projected numbers did not come from Globalstar's published numbers and do not depend on them. They came from our own work. The numbers on G* will change as new information on subscriber demand comes out from the telcos/cellular provider indications. The next time new calculations are to be made is after ICO goes public. You may also recall that
fixed-site (as opposed to mobile) projections are impossible to ascertain given that these are the work of Ministries in various countries where they are desired, and not the result of different country "private sector" telco solicitations. It is these fixed site indications that I would expect Globalstar management to be identifying as they get closer to ramping up, and giving an accounting of at their shareholder meeting in April.
Subject: Re: Price???
Date: Tue, Feb 17, 1998 13:49 EST
From: Readware
Message-id: <19980217184900.NAA19296@ladder02.news.aol.com>
Loral will not move aggressively in price till the third G* launch, 15 July of this year. At that time the source of earnings from the G* constellation will become "visible" to Wall Street "seers". From 15 July 1998 to 15 May 1999 Loral will have launched G* in its entirety, Orion 3 and 2, Telstar 6,7, 8, & 9, SatMex's replacement GEO, and probably will have added another satellite constellation to its portfolio.
This very aggressive deployment will translate into highly visible earnings power for Loral and earnings growth, and shareholder wealth.
On a pricing model, Loral looks to move to $26/share by the second launch (24 April) and then with the third launch to start "breaking" steadily higher pricing ground. $36/share by year end looks quite achievable, given the satellite deployment schedule and the earnings growth they represent for Loral.
Subject: Re: Valuation of Loral
Date: Tue, Feb 17, 1998 17:50 EST
From: AGreenland
Message-id: <19980217225000.RAA06495@ladder03.news.aol.com>
When companies are not earning any money it is obviously difficult to figure out what they are worth - of course it is all based on potential. But based on where globalstar is presently trading at it is a gross understatement to say that Loral is undervalued.
It was stated on the board that Loral owns 38% of Globalstar and 15% of CD Radio. What this means is that essentially when you buy 1 share of Loral you are getting .38 shares of Globalstar and .15 shares of CD Radio. Using round numbers lets put globalstar at $60. We multiply that by .38 and get $22.8. For CD Radio let's round down to $ 17 then multiply that by .15 and we get $2.55. Adding $22.8 and $2.55 we get $25.35.
So in other words with Loral trading at $23 3/4 when a share of Loral is bought now the buyer gets the rest of Loral ( excluding globalstar and CD Radio) for free.
Subject: Re: Valuation of Loral
Date: Tue, Feb 17, 1998 18:27 EST
From: Valuer
Message-id: <19980217232700.SAA12877@ladder03.news.aol.com>
Not even close agreenland--I wish it were as you spelled out here! You are making incorrect assumptions. Go to the FAQ and see what portion of Globalstar is held by Loral.
Subject: Re: Valuation of Loral
Date: Tue, Feb 17, 1998 20:38 EST
From: Readware
Message-id: <19980218013800.UAA25984@ladder02.news.aol.com>
Unfortunately, Agreenland, you would have to divide the ownership price you calculate for Loral in Globalstar by 2, (= $14.4/share of LOR [reason: Loral has just about twice as many outstanding shares as G*]) and for CDRD you would have to divide the current $17/share for CDRD by the number of shares of CDRD outstanding into those of LOR (I believe the quotient is roughly 23, then), and you get about $.75/share. $14.4 + .$.75-- a touch over
$15/share of Loral for the Loral ownership in G* plus CDRD. We do not get to your price of $25.35, wistfully as we might want.
At the $24/share level, based on a current EBITDA multiple of 21-22, Loral is probably just about where it should be today. On a discount of future earnings to present (which is how G* is priced by any investor interested in its business, be that investor from Wall Street or be it, say, GE, e.g.), clearly Loral is undervalued. It should, if you use the valuation method applied to G* (namely, discounting Loral's 2002 earnings to 1998, 1st qtr) ,
probably be trading close to $35/share today. However, that valuation methodology is never applied to a satcom provider. As Loral changes from a strictly satcom provider (an example of which is PanAmSat) to one that is telecommunications and data delivery driven, its valuation will change, and the methodology for calculating that valuation will also change. Because investors pay a premium for growth, and a high premium for accelerating growth, be
the investor one who buys 100 shares of stock, or a major coporation that is willing to buy in total a rapidly growing company such as Loral. At that time when Loral is seen as a telecommunications/internet company (a rapidly growing company), one should not be surprized if Loral trades at a premium to the valuation such an enterprise noramlly receives.
We are not, however, at that juncture. Once its G* constellation and Orion constellation, along with Skynet are fully in place, perhaps then (mid 1999) some may speak of LOR as occasionally trading at a premium valuation to its normalized p/e. But as of today, on a pricing model that is generally accepted, Loral at $24 is just about where it should be. As April approaches (barring no further acquisitions) it will probably be close to $26. If it is
around $26 by April, the pricing model will have exhibited some reasonable degree of guidance to Loral's further price appreciation, which should be in the $36 range by year-end.
geoff |
