SPL looks very interesting at these levels, volume through on...

SPL looks very interesting at these levels, volume through on Friday appears to be the end of a larger selling line.

The Vivagel/SSL collaboration appears to be going very well and these revenues to SPL have a very low probability discount weighting against them.

Durex is a key revenue stream for SSL (45%).

SSL generated EBIT of approx GBP68.1m in 2008 has 100m of net debt, 190.1m shares on issue and a current share price of 4.45.

Therefore it trades on an EV/EBIT of 13.9x 2008

SSL earnings are growing at approx 12% CAGR so EBIT in 2011 should be approx GBP 95.7m and hence its 2011 EV/EBIT is 9.9x

Assuming that SSL has to pay SPL royalties of say A$10m-A$15m in 2011

What is the value of this royalty stream to SSL?

Answer = A$100 to A$150m.

Halve these amounts to ensure that it is an EPS accretion gobsmacker to SSL and = $0.28c to $0.56c

Throw the rest in for free

cheers