Forum Archive Index - September 2000

[Brian Gale <brigale@i4free.co.nz>]

I believe your rationale is correct Peter. I have been puzzled with BCH for 
some time too. The price will not stand logical examination P/E is the 
highest on the NZSE. The last result was marginally better than forecasts - 
not substantially better - but the price went higher !!

The only conclusion I can make is that BCH is the darling of the market a 
bit like BRY was years ago and investors who don't concern themselves with 
P/E's , or any of that jazz, climb on to the bandwagon. IMO there has to be 
an eventual day of reckoning,  it always happens in the long run.  The 
question is when ?
As you say the built in premium will cover potential profit gains for years 
to come. The current price should not be higher than around $6.00. Wouldn't 
be surprised if they did another split.

Sour grapes with me too. I had the opportunity to buy around the $6. mark 
and didn't because the price seemed to be getting too high.

Regards
Brian

At 12:22 12-09-00 +1200, you wrote:
>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
>
>
>
>
>--- Move to a better address ---
>        + today freemail +
>     http://www.today.com.au
>
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