OK get your down thumbs ready, here's my thoughts, lolFirst up,...

OK get your down thumbs ready, here's my thoughts, lol

First up, Exco did not get what I thought they would for an asset sale of E1 & Monakoff.

I was expecting a MINIMUM of $200mil, Fair Value around $250mil, top dollar over $300mil.

My thoughts on how to value Exco right now, are to come up with a value of what the company will be worth to the market, after the dael is done and the dividend is paid, then add back in the dividend and franking credit for Fair value right now.

So the first set of numbers I wrote down yesterday after the announcement was-

120mil in the bank
(20)mil tax
35mil White Dam, remember it only has 4mths left, +8mths
10mil other tenements
10mil royalty
(12)mil Corporate Costs

143mil total.
40cps
with a variance of 10%ish
gives a range of 36-44cps
Add back the dividend and the franking credit,say 40cps
gives a fair value now of 80cps
with a range of 76-84cps

Fair enough, but the market never values money in the bank at fair value, they view most of it as an insurance policy.
Most times the cash at bank is valued at 50%-75% of it's true value.

So at 75% of the cash at bank value-

113mil total
32cps ex-dividend
28-36cps variance
72cps Fair Value now
68-76cps range

at 50% of the cash at bank-

83mil total
23.5cps ex-dividend
20-28cps variance
63.5cps Fair Value now
60-68cps range

so I think that is how many in the market are seeing the
Fair Value price in Exco now.



I sold some yesterday, but not a lot as I still think some in the market will "buy the dividend" when it is formally announced, and bid the price up, how much is the question.

So right now I see Exco around fair value or maybe just a little undervalued.

At 66cps, the market are saying that when Exco go ex-dividend, they will be 26cps, who knows if that is right or not, but it falls within the 50% model.

cheers