Forum Archive Index - May 2000

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

>
> They sent out a notice of meeting yesterday
> I seem to get a value over $2 with $36m of cash and the Bendon
> business
> 
> Anyone know anything about it
>
Jim I am interested as to how you got your valuations.   Perhaps you 
would like to critique mine?

The way I see it, the value of Ceramco rests on the value of what 
will become of  'Bendon' after all the China Clays stuff is sold off. 
   Bendon is a clothing company with a strong brand name, so I asked 
myself, what sort of P/E ratio could we expect from a stand alone 
company like that?   There is nothing to compare it to that remains 
listed in New Zealand and if you look to Australia most of the listed 
rag trade shares seemed to be combined retailers/manufacturers.   But 
with Bendon's recent purchase of a bankrupt chain of lingerie shops, 
maybe they are looking to become an integrated retailer/manufacturer 
too.    I found it difficult to ferret out information on comparable 
Australian companies who are making a profit-' Countryroad' has made 
losses for the last two years.   'Just Jeans' is in profit but 
trading on a P/E ratio of only 6.5.     Bendon itself, when last 
listed as an independent company traded on a P/E of 12 in 1987, just 
before the share crash of  that year.   Let's say an appropriate P/E 
for Bendon to trade at is 8.    Sounds modest but that is 20% better 
than anything I can find as a near equivalent in Australia.

Bendon forecast EBIT of 7.9million in the 2001 financial year.   This 
is based on no material increase or decrease in the value of the 
dollar against other major currencies-  That is a flawed assumption 
as the $NZ has crashed around 10% vs the $US since early April.  They 
are also forecasting no material change in the existing general 
economic conditions in Australaia and NZ.    Wrong again, as GST is 
expected to significantly affect clothing sales in Australisa this 
year.   So I would adjust this forecast down to around 7 million to 
take into account these factors.    This gives EBIT of around 
7million and I reckon with all the restructuring going on, the 
Ceramco accountants will be clever enough to see them pay no tax 
in the  2001  year.    So we get a market valuation of $56million for the 
company, which divided by the 30.33 million remaining shares gives a 
valuation of $1.85 per share.

Now for every  4  Ceramco shares you hold now, you will get 3 of 
these new shares plus $1.59 cash.    This gives a theoretical on 
market price for Ceramco today of (3(1.85)+1.59)/4=$1.78.

Earlier today Ceramco was trading at $1.72, or just below what I am 
calling 'fair value'.    Anyone agree, disagree or have any other 
useful comments to add? SNOOPY


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