"Reading other contributors comments makes me amazed at saying PRG should pay $1.50 plus per SKE share- for what.
A negative NTA and a big debt."
Jawstwo,
Your unhappiness with SKE tangible asset position is a curious one.
I am assuming you have the same gripe with the following businesses which also have negligible NTA compared to their market values:
CRZ (Market Value = $2.4bn, NTA = $0.05bn)
SEK (Mkt Value = $5.7bn, NTA = -0.47bn)
REA ((Mkt Value = $5.0bn, NTA = 0.40bn)
MFG (Mkt Value = $3.2bn, NTA = 0.27bn)
PTM(Mkt Value = $4.6bn, NTA = 0.30bn)
Do you believe companies are valued only on their tangible asset backing, or do you think that the market is a little bit more sophisticated than that?
Is it beyond the realms of possibility that companies are valued on the cash flows they generate and the rate at which those cash flows are returned to investors?
As case in point, notwithstanding the patent absence of tangible assets on SKE's balance sheet (and this is not a new thing: NTA has been negative or negligible NTA for most of its listed life), for the period that I have studied (2002 to current) the company has generated a cumulative Operating Cash Flow of $600m, and, of that, has generated a cumulative total of $450m in Free Cash flow, of which over $200m has been returned to shareholders.
On average, the company generates some $25m pa in Free Cash Flow.
Don't get me wrong: I am no cheerleader for the quality of the business model, or the way the company has been managed over time, and I am on the record as having a comparatively muted view on what SKE shareholders should expect in terms of any realistic offer from PRG.
But in response to your earlier proffering of 75c being the appropriate price: given that would translate into a P/E of some 5 times for SKE (and that's before synergies, mind), it's even more ludicrous than the $1.80 price being bandied about.
