Forum Archive Index - November 2000

["G Stolwyk" <stolwyk@wave.co.nz>]

 

Dear  Hugh,

 

I have discussed in the contributions of Nov 6 and Nov 7.

 

LANG has excellent pricing power in negotiations with the shipping companies or in discussions with the exporter/importer.

It has 'seamless'  feeder routes to the docks. It would be difficult for a transport company to compete with LANG!!  

 

We can expect reasonable high growth rates for a number of years as these feeder routes increase: don' t underestimate the importance of the Holyman takeover!

Other reasons for possible high growth rates have been discussed.  

 

We can expect a compound growth rate of  profit of about 15% or higher. This include cost savings and the high cashflows arising from trading and depreciation. Some amortisation of goodwill has to be made but free cashflow will be considerable.

 

At these levels compound share price increases could be higher than 15% and perhaps at least 20% up to 30/12/2004, the expiry date of the options when the remainder are converted to shares on payment of $A8.75 per option.

 

Applying the 15% and 20% compound growth rates from 30/12/2000 to 30/12/2004 ( 4 years- we shall build in extra 'safety' by ignoring the 7 weeks to 30/12/2000!! ),forecasted shareprices could be $18 to 21.50!                                   

( Yesterday's shareprice of $A10.35 is the NPV ).

 

Immediately prior to conversion in Dec 2004, the values of the OPTION could be from $A 9.25 to $A 12.75. ( These are derived by subtracting $A 8.75 from above mentioned shareprices).

 

Current LACO market price is $A 2.35.

 

To obtain $A 9.25 to $ 12.75 option value in  Dec 2004, it has to rise at a compound annual rate ( starting on 30/12/2000) of between 41% and  53 %!!

 

Actual compound rise could be at least 53 % !!!  

 

If you were happy with a compound rate of 25%, Hugh, then you should be paying from $A 3.75 to $A 5.20 for this option now, instead of the current price of $A 2.35!!

 

Or,if you wanted a 30% return, then you should today pay from $A3.25 to $A 4.50  for this option! 

 

Notes: On conversion, options are entitled to any bonus issues accrued to shares during the period leading up to conversion. They are entitled to cash issues but will need to be converted to shares first by payment of $A 8.75.

We don't expect any cash issues during that time,because:

 

Lang completed an issue early Jan. The conversion of the 13.6 mill. options in dec 2004, will bring in another $A 119 mill.. We have a heavy cashflow as well. Anyhow, at higher share values, placement of some shares can raise a lot of cash in a very short time at little cost!!

 

Should there be a takeover, then the offerer will need to pay a very high price for this prime company and for the options!!!

 

The price of these options has increased by 100 % since they were issued in Jan 2000.

 

Hugh, this completes the study of LANG options. I have put mine in the bottom drawer!!

 

Share and option prices are currently rising on expectation of a solid annual result to be announced ( after Nov 20? )

 

Disclaimer: Contents of this email are my opinion. Much care has been taken with the preparation of this work; however,circumstances which may affect this opinion can change.

Also,the accuracy or completeness of this work cannot be guaranteed.Any claims for damages arising from either reading of, or communicating the contents of this email to others, will not be accepted.No one is asked to buy, hold or sell shares in any company,trust or any other instrument.

                                                                                       I was not asked to compose these emails and no fees were paid. 

 

 

Gerry