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Strategies & Market Trends : Mr. Pink's Picks: selected event-driven value investments -- Ignore unavailable to you. Want to Upgrade?

To: Mr. Pink who wrote (3846)	10/8/1998 10:08:00 PM
From: Shtirlitz	Read Replies (1) \| Respond to of 18998

Mr. Pink, Regarding ABTX and the seed sector in general. Why are the valuations for the rest of the companies in the sector are so high? Look and DKB, DLP, MYCO, PHB and others. They are all trading at a huge multiples. Comparing to them ABTX is undervalued. Or are they overvalued? What is your opinion?

To: Mr. Pink who wrote (3846)	10/9/1998 4:13:00 PM
From: Peter Lochowicz	Read Replies (1) \| Respond to of 18998

Why then is Soros long ABTX?

To: Mr. Pink who wrote (3846)	10/10/1998 8:01:00 PM
From: Big Dog	Respond to of 18998

Found this in Online Investor on AOL: Aug 19, 1998 AgriBioTech: Takeover Target for DuPont? Reports that DuPont (NYSE:DD - news) is in talks with Elf Aquitaine to sell its Conoco unit for more than $24 billion may carry some significance for agricultural biotech firms. $24 billion would fund a nice little shopping spree, and DuPont has expressed an intention to grow its Life Sciences business through acquisitions of ag biotech companies. AgriBioTech Inc. (Nasdaq:ABTX - news) has developed its own reputation for an aggressive acquisition strategy, and now it could find itself either a potential takeover target of DuPont or a competitor in the race to consolidate the highly fragmented seed industry. AgriBioTech has grown rapidly through acquisitions to become a major player in the seed industry. But there's been a frenzy of mergers in ag biotech lately, creating a rapidly changing competitive landscape. A few months ago, Monsanto (NYSE:MTC - news) gobbled up Dekalb Genetics (NYSE: DKB - news) , in which it already owned a 40% stake, and Delta & Pine Land (NYSE:DLP - news) . Around the same time, DuPont announced plans to divest 20% of its ownership in Conoco through an IPO and sell off the rest over several years. Even at that time when DuPont was only talking about raising $5 billion from selling part of Conoco, there was speculation that it would target Monsanto for a takeover. DuPont also owns a stake in Pioneer Hi-Bred (NYSE:PHB - news) . AgriBioTech may or may not fit into DuPont's acquisition plans, but its market share nearing 40% of the forage and turf seed segment is surely the envy of these larger players. The company is well-ahead of schedule in achieving its stated goal: a 45% market share and annual revenues exceeding $500 million by the year 2000. ABT, as AgriBioTech is known, has made 29 acquisitions in 3-1/2 years. Sales have exploded from around $5 million in FY95 to an estimated $425 million for this year, including revenues from pending acquisitions. The buying binge has resulted in net losses for the past several years, but ABT is breaking into profitability this year. The consensus is for earnings of $0.17 per share this fiscal year (ending in June), $0.34 in FY99, and around $1.00 per share among the few analysts making projections for FY2000. A long-term growth rate of 32% is anticipated. The company is due to report its fiscal 1998 results any time now. The domestic market for forage (mostly hay and alfalfa grown for livestock feed) and turfgrass seed is currently estimated at about $1.1 billion. Some experts think the market could double in the next decade as this segment transforms from a commodity business to a premium-priced product environment, thanks to value-added traits from genetic engineering. It is a formula already proven with other crops such as corn, soybeans and cotton. In March, ABT entered into its first biotech research agreement with the Noble Foundation, a private organization which will use genes it has developed to create alfalfa with improved digestibility. Digestibility is a key factor affecting feed value in forage, and ultimately in the production of milk and meat. Genetically-engineered crops have gained rapid acceptance in the agricultural industry for their enhanced resistance to pests. Ag biotech is also poised to deliver on its promise of enhancing crop yields and even nutritional composition. Much of the focus in recent years has been on food crops like corn and soybeans, but now analysts are making a case for the forage and turfgrass markets as well, where ABT dominates. Global demand for livestock feed is underpinned by income growth in developing countries, which is boosting consumption of meat and milk. That, combined with the prospects for premium pricing of genetically-enhanced seed, offers attractive growth potential. In the turfgrass area, there is a solid growth trend in place thanks to the construction boom in golf courses, homes and parks. Here, too, the potential for biotech value-added is clear -- better resistance to pests and disease, improved color and lower maintenance costs. The stock rallied as high as $29.50 in June following the flurry of merger activity in the ag biotech industry, but it has retreated to the high-teens currently. Concerns about earnings dilution due to additional equity issuance (private placements) have contributed to the pullback. Regardless of any speculation about a potential takeover bid from DuPont, analysts are very keen on AgriBioTech's prospects. Five of the seven brokerage firms that cover ABTX have a Strong Buy rating on it, with intermediate (9-12 month) price targets in the $30+ area. Whether AgriBioTech turns out to be a takeover candidate remains to be seen. Regardless, the company is expected to bolster its dominant position in the forage and turf seed markets through its own acquisitions, and use biotech value-added to leverage its pricing power and boost margins.