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Author: dzwyer Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1220  
Subject: Re: entry point Date: 4/30/2003 3:25 AM
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As an owner of HAS myself, your question was a good reminder to
reevaluate my investment.

I use the DCF-method to terminate to intrinsic value of HAS.

The current numbers are (10K):

                                02         01          00          99

Net Income                  -170.7       59.7      -144.6       189.0
Operating Cash Flow          473.1      372.5       162.6       391.5
Free Cash Flow               414.4      322.5        37.6       284.0

Change FCF                   +28.5%    +757.7%      -86.8%

As you can see, the changes in FCF (the base of the valuation) are
quite erratic, and therefore difficult to extrapolate. We are walking
on thin ice when making predictions, so we have to apply a big margin
of safety.

I ran the following numbers:

FCF Growth rate
Year 1-5        10%
Year 6-10        5%
Year 11-15       5%
Terminal         3%

Discount rate   11%
Dilution         3%

With that, I get an intrinsic value of $42 per share, which looks
quite comfortable to me.


With the following numbers, even more conservative, I get an intrinsic
value of $31:

FCF Growth rate
Year 1-5         5%
Year 6-10        3%
Year 11-15       3%
Terminal         3%


Now you can play with these numbers, but the general conclusion for me
is that with the current share price of $16, we are still on the safe
side from what we can see today.

Daniel




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