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10:34
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Originally posted by getmurt:
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$1 constitutes a market cap. of circa $400 million for a full production plant and implies a PE of 5 times EBIT ($80 million). At that point in time the Project is de-risked and PE / PEG would be the most appropriate way to value the company IMO. I don't think NPV takes into account that the funding for this Project lies almost entirely with Alcoa (see below**). $388 million with no production plant, and the financing for this has not been secured. Their current earnings are how much??** Assume you had a spare $137 million (FYI current market cap.) and wanted to invest it. A fortunate 500 company said to you, we are embarking upon an exiting new venture that you can be a part of. Be aware there are risks. However, we (Alcoa) are going to put up $250 million and mange the Project with our team of experts. We will also give you 35% ownership of all facilities. After a few years, all going well, we will give you $80 million a year as a return on your investment. All you have to do is chip in 35% of the operating costs. Payback period therefore would be say 4 years (2 development and 2 production). Thereafter, rivers of gold for youlearly FYI are bringing their expertise and IP to the deal as well . Notwithstanding, does that sound like a totally shitty deal?? Those selling at current prices clearly believe so.
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I'm not sure why you can conclude that people who sell at this level wont be buying back in. In your own words this sp isnt going north anytime fast, and surely the project will be even more de-risked after phase 1 is signed off and if alcoa are still playing ball, so they can get back in then. Or alternatively this sp could go backwards another 20 or 30 percent very fast ! which might allow people to jump back in !
(20min delay)
