Colt - 2005 New Year, New Highs.............

KevinJames - I refer to your post 7373 and make the following observations.
1) There is a big difference between your estimate of the infrastructure (£3bn)compared with the value shown in the Balance sheet(£1.1Bn). I understand the point your are making but your estimate of real worth might be on the high side.
2)I'm not sure I understand the logic of your argument which essentially seems to be: we have a fixed asset of £3bn, market cap of £850M and therefore the sp is massively undervalued. The real worth of this asset where the market is concerned is its value in generating future income(where income = free cash flow positive) streams. If this future income stream is merely sufficient to pay off the net debt (your assumption), then I could argue that the sp should be zero. Excluding the bid element in the sp, the sp is essentially equal to the discounted value of the future income stream 3 years(approx)hence. Why 3 years ? Well this is roughly the time it will take to pay down the net debt- so none of the income stream during this period will be available to shareholders. So I'm not sure whether valuing the asset in this way has any real meaning.

One other point is worth mentioning. People often overlook the fact that Colt has a tax credit of nearly £2bn. Tax on future income will therefore be offset against this tax credit(ie Colt is unlikely to pay tax for many years). I have my doubts whether this has been properly factored into the sp.