Forum Archive Index - November 2000

["Warner Lamb" <cloud9@i4free.co.nz>]

Hi Peter, that is certainly an extreme case, and I agree makes BCH look way
overvalued...thats why I own RMG. The figure you show looks very ugly next
to $50m but you havent shown the compounded value of those revenues and
earnings over 20 years (which looking at current market value of BCH,
current buyers are assuming will keep growing at a substantial rate of
15-20%pa) Obviously, buyers would not assume that BCH revenues and earnings
will remain static,

I know you like the Warehouse....do you believe they are overvalued with
huge goodwill? What would happen if K-mart tookover WHS ie $2.15b cap with
70m in earnings and $1.84b in goodwill amortised over 20 years = $92m per
year against current earnings of 70m.

Going back to the original idea.
If two companies are worth $10 million and produce $1 million in earnings
but one has $5 million NTA's and the other $10 million NTA's, is the company
with $5 million goodwill worth more? If you follow the Buffett example..yes.

In BCH case, some would say it's too much goodwill, and too risky to be
justified by future earnings growth. I agree.

The point Im trying to make is that apart from an accounting practise, why
is it so important that the Goodwill is bought back to "tangible assets"
when the "intangable" assets are producing the same returns. They are not
"really" seperate from the company.
I must be missing something..Help!

Warner







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