Forum Archive Index - September 2000

["Peter Maiden" <pmaiden@today.com.au>]

I am looking for somebody (maybe a rich converted Baycorper) to tell me where 
my thinking has gone wrong when I have decided on several occasions not to buy 
into BCH. My rationale for making such decisions has been -  

Baycorp is a company I admire. Especially how it embraces technology to extract 
immense value out the information it has built up over many years. I also 
admire the approach it is taking in transporting a tested business model to 
other parts of the world. I also  admire the recent growth in earnings the 
company has achieved.

Several times in the past I have considered adding BCH to my portfolio. Each 
time I have been tempted I have decided not to purchase because of the high PE 
ratio that prevailed at the time.

However the price continues to climb, as does the PE

If I had been a 'momentum' buyer  I too could have been taken along for a 
profitable ride as many have done. Things like PE ratios don't come into the 
decision making rationale.

Again I have been tempted and again decided not to invest in BCH - because of 
the high current PE.

Last reported earnings  of $15.7M and 20.3 cents/share  (on revenues of $58.5M) 
 gives a current PE of 65.  Prospects are reported to be "expected 20 per cent 
annual profit growth over the next three to five years". On these future 
prospects one would expect earnings to reach $27M and 35 cents/share in three 
years.  At today's price that is sill a PE of  38. If the price moves up  10% a 
year to say 1770 the PE would be 50.

Whatever PE I use in making my decision whether to buy or not I am 
uncomfortable with - especially when the current price already has built in the 
future growth prospects.  In other words I consider the shares to be overvalued 
with not much prospects of growth (in the share price that is. There is a real 
chance of a falling share price if the market decides that these shares should 
trade a a more respectable PE ratio.

Maybe what I am missing is that the true value of the company is not it future 
earnings stream but the value of its intellectual property, But then would 
anybody pay more than a $1B ( BCH market cap) for the records and processes 
they have.

Look forward to hearing from anybody who could me right. After this decision 
making process has caused lost opportunities

Peter 




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