tomorrow's opening price, page-12

re: tomorrow's opening price...unbelievable Hi Andrewe

Reasonable questions.

Firstly I consider forwards earnings to be generally rubbery and particularly so when divorced from historical reality. In this case SEN may hit their 3 year target but I would still be buying them on the basis of a fair price for what they are able to deliver now.

Let's be generous and assume that they achieve earnings of 11 million for the full year, the announcement you said they ran to 91 cents on. Was the run a reasonable reaction?

With outstanding shares of say 463 million (6/05) that's an eps of 2.4 cents or a P/E of 37.9; now that would mean on current earnings (allowing they achieve the $11million) it would take 37.9 years to earn your money back. Is that a good price? Personally I don't think so.

Now putting those earnings through a basic discount cash flow calculator assuming growth of 20% per year (very solid but less than projections) for the next 5 years with 0% growth thereafter and a discount rate of 11% (pretty generous I know) we get a stock value of 45.5cents per share. I would consider that too cheap when the business, it's strong current position and it's potential - the x factor, is considered.

With a 30% annual growth rate but everything else the same you would get a discounted cash flow valuation of about 65 cents. Now that's a generous average growth rate for the next five years - few companies achieve it. I only used a very basic calculator but I am comfortable with that sort of price for SEN right now - cheaper is nice. I certainly can't find a reason in my mind to justify 91 cents.

I don't know if they can achieve 250 million in 3 years in sales, nor do I know what that would convert to in earnings. In the IT business anything is still possible - from incredible boom to rapid redundancy. I haven't read the company up in detail but at this point I am comfortable with them and think they will do well.

By the way Andrewe you were right about my previous email. I don't give tips nor do I buy on them - anymore, I've made that mistake!! I don't want to be the bloke that gets the blame when someone else loses money. I do like to engage in debate about the merits of something though.