Forum Archive Index - December 2001

["winner69 ." <wwinner69@hotmail.com>]

Snoopy asks these sort of questions on the FIG message board. There was a 
long discussion on the other channel about WHS and I did much the same 
analysis as Snoopy does (on AIA and LPC for instance) on WHS to answer the 
question would Warren Buffett buy WHS.

Based on the assumptions of WHS making a 25% ROE and paying out 50% of 
earnings in dividends over the next 10 years (both in line with current 
performance) the analysis showed that the current WHS price is slightly less 
then what Warren might be expected to pay for them.

Snoopy the numbers are (per share as per your layout)

Year Equity Earnings Dividend
2001  1.18
2002  1.33     .29     .15
2003  1.49     .33     .17
2004  1.68     .37     .19
2005  1.89     .42     .21
2006  2.13     .47     .24
2007  2.39     .53     .27
2008  2.69     .60     .30
2009  3.03     .67     .34
2010  3.41     .76     .38
2011  3.83     .85     .43

This shows that in 10 years time WHS will be earning 85 cents a share. At a 
pe of 30 (traded around this mark for some time and assuming current number 
of shares)share price would be 25.54, Dividends collected on the way through 
have been 2.65. Snoopy's formula for a 15% return suggests that Warren would 
pay 6.99 (it would have to come out with a 99 cents in it for The 
Warehouse).

A reality check is that earnings in 2011 would be $250M. Somebody said on 
the other channel that this is pretty realistic.

On this basis Warren might be interested in WHS. The other way of looking at 
it is that WHS is probably currently fairly valued (if you believe the 
growth story)

How does all this sound Snoopy? Or have I really messed up the numbers 
somewhere? This does hoghlight the compoundong thing you tak about.

Winner69 from the other channel - see we do keep an eye on developments over 
here and sometimes only too happy to share our thoughts.

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