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Technology Stocks : Safeguard Scientifics SFE -- Ignore unavailable to you. Want to Upgrade?

To: John Arnopp who wrote (1141)	2/22/1998 5:19:00 PM
From: ncs	Read Replies (1) \| Respond to of 4467

John: Givent the information we have available, I have no qualms with your method of valuation. Similar to you, I view the company as three parts, the public companies, the private companies and the venture funds. A rough estimate of the private companies value can be ascertained from SFE's filings. Last year's annual report for example indicated that the non-public companies has revenues of $161MM, which if you give them a valuation of 1X sales, you get approximately $5.20 per SFE share. The annual report also provided figures for "Committed Capital" for the funds. SFE's per share value for the committed capital worked out to be approximately $1.40. Hence I have taken the position that SFE's value exceed the NAV by a minimum of $6.60. Utilizing your method of assigning a value to the "dividend" from SFE's rights solves the problem of trying to figure out the value of the non-public entities. However, I would argue that SFE's reputation is such that a 30% cap rate is too high. At the present, we are arguably assured that SFE will meet their goal of three offerings for this year and next. (I would think that Intellisource, MultiGen, RMS, Whisper, and WHO? are all near a position to be spun out.) I would be tempted to use a maximum of 20%, which would give you a $15 premium to NAV. The bottom line is that SFE is and has been for sometime undervalued by Wall Street. I did a survey a couple of months ago and determined that the Average premium from November of '96 to November of '97 was $5.10. However, I am unsure that I had all the stock positions right, as they are pretty well impossible to tract other than at the end of the quarter. While it would give number guys (like us apparently) comfort to be able to get a precise value on SFE, I'm content to know that the value is well north of the stock's current value. Although I'm really looking forward to ripping apart the annual report as I added to my position significantly recently. Neil

To: John Arnopp who wrote (1141)	2/23/1998 11:33:00 AM
From: David Lawrence	Read Replies (1) \| Respond to of 4467

John, I generally agree with your approach. I guess we can infer that, based on 3 offerings a year and an implied 10% annual dividend yield, we should expect SFE to drop between 3-5% each time it goes ex-rights.

To: John Arnopp who wrote (1141)	2/24/1998 10:10:00 AM
From: KatayamaGorobei	Read Replies (2) \| Respond to of 4467

John, I like your model, and I think that it is a good way to evaluate SFE, but I feel that it doesn't take into account the fact that SFE holders aren't actually getting dividends. They are getting securities which have historically appreciated at a faster rate than cash dividends would. For your model to be more accurate, I feel you would have to take into consideration the average appreciation of the spinoffs over time. You could then come up with two SFE valuations. One with the rights sold and converted to a cash dividend. The other would be with the rights converted into stock and held. This latter valuation would be higher, and would more closely reflect management's intent with respect to the rights offerings. (i.e. that they should be bought and held) Regards,