Forum Archive Index - June 2000

["Philip Robinson" <robph639@student.otago.ac.nz>]

I was trying to do some Buffet analysis on Baycorp but ame upon some
difficulties, can anyone help out.

>From reading buffetology I got some steps, first (1) project the per share
equity value of the company for 5-10 years. This is done by using historical
trends for the R.O.E. less the dividend payout rate. I decided to just
project the current increase in per share equity which came to 3.4%.

(2) Then multiple the projected per share equity value by the projected
future R.O.E. 5 years out, which gives the projected future per share
earnings of the company.

(3) So if you have the earnings and the average P/e one can project the
future trading price and then work back with the current price and then work
out the annual compounding rate of return.

But I came unstuck with step two because I also projected out the EPS using
the average increase in EPS( projected EPS 1) as well as the above buffet
way (projected EPS 2) and % years out they are 52c (EPS % projection) and
15.2c (Buffet). These are wildly different figures and I was hoping that
there fundamentalists that can help. Because if one assumes a PE of about
30, cos hopefully in 5 years things will settle this gives two prices one is
$15.60 and $4.56. But if you look at the last year it had a ROE of 45% so is
it that you cannot apply Buffet to baycorp or is it that I am doing it all
wrong and I am wasting everyones time?

Phil

Attached is my number and disclosure sold Baycorp $10.50 pre-split, so want
to know whether it is worth buying back.

baycorp1.wks