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

To: dougjn who wrote (2411)	4/2/1998 5:26:00 AM
From: Thomas	Read Replies (2) \| Respond to of 10852

To Readware: Re: GSTRF discount rate and launch schedule. I read your posts with interest via Geoff on the SI board (I have no AOL access). Thanks for all the insightful commentary. Sorry if these questions have been answered before in prior posts (I did check the FAQ pretty thoroughly, though). What I am wondering about is when is the estimated inflection point or crossover point for the discount rate applied to value GSTRF? I don't have a launch schedule on hand, but seem to recall that most of G's sats will be aloft (assuming successful Zenit launches) by September. If this is so, wouldn't it be reasonable to expect that there would be a fundamental shift in the valuation of G? In other words, the business risk/ demand issues seem to be much less of a risk factor to GSTRF valuation than the launch risk. Your $385 2002 price projection implies around a 48% annual return from today's circa $65 price, and I would think that a lot of that (projected) return premium is driven by the launch risk. GSTRF performance since the Feb launch seems to have confirmed that hypothesis, that the each successful launch removes a chunk of the launch risk element, i.e. lowers the discount rate of future earnings. What I am getting at is, with the launch risk being incrementally reduced over the course of '98 with additional launches, wouldn't it be reasonable to ratchet down the discount rate and, thus, ratchet up the PV? If you assumed a 100% success rate of timely launches, what would you see as a reasonable discount rate for the business of G* (with all sats deployed)? Granted there is a lot of uncertainty about demand, etc. but it would seem to me that the business risk is essentially more like a 25% discount rate kind of risk than the current 48% (of course the 48% is hypothetical based on your projection of the future value of G* in 2002, but nonetheless). Thanks in advance. I am posting this to the SI board as well. Cheers, Thomas