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From: "G Stolwyk" <>
Date: Mon, 27 Nov 2000 00:21:19 +1300

1.Background to LAC and LACO: Please refer to my entries of Nov. 6, 7, 8, 24 ( 2*). Their web site:
Currency on this page is in $A !  Readers, please note the disclaimer at the end of this page.
I commented on Lang's excellent Annual announcement which said that on sales of $ 583.4 mill., operating profit (before tax and abnormals), was $ 78.8 mill.
Corresponding operating margin was a solid 13.5 % !
At present we have 122.6 mill. ord. shares (LAC); 27.2 mill.conv. shares; 13.6 mill. options ( LACO) and 4.6 mill.employee options. 
There will be a continuing  demand for capital as this multi-faceted company expands at a rapid rate.
While the net operating cashflow was a high $ 111.3 mill., all the cash had to be spent on a number of projects, including restructuring,upgrading of ports, take-overs,consolidation and redundancy payments of $15 mill.
However, at higher share prices, a placement of shares-without eroding the capital base much-will quickly raise some $100 little cost!
Because of the advanced technical know-how of logistics and operations, there could well be another source of income later on:
Consultancy to and/or management of ports outside Australia!
Further income can be expected from the licencing of technology.
2.Reasons for predictions and proposed methods to be used.
The last prediction of values was done before the Annual result: See entry of Nov. 8.
At that time not sufficient knowledge was available about the outcome of a host of measures taken by LAC and a conservative approach to values was taken.The reader was warned accordingly.
As it turned out, operating profit (after tax and before abnormals) rose by 70 % and net profit by 60 % !!
And on the day the result was announced, there was another ( beneficial to LAC! ) take-over!
It is becoming clear that the compound rate of earnings/share ( E/S ) growth up to 30/12/04( when LCO expires) will gravitate to 20 %+ rather than 15%. 
The envisaged compound rate of LAC prices ( in my report of Nov. 8 ) was equal to E/S compound growth
In practice, a high quality infrastructure stock requires a premium above that: And that will increase as LAC lives up to its promise. It shows every sign of doing so !!  
It is difficult to quantify this premium; obviously,as investors become aware of LAC's and LACO's  potential returns, shares /options will become scarcer and prices must rise!
We shall ignore such premium but at the same time assume that the compound rate of LAC's share price up to 30/12/2004 will be at least 20% : There are a number of  unique positives which work in tandem for LAC and have been explained in previous reports!!
Using 30/12/00 as the starting date ( the reason is explained in my entry of Nov 8) and the current LAC share price of $11.40  as the base figure, LAC's share price on 30/12/04 could be $ 23.64 using the-previously referred to- 20% compound rate. 
Deducting the $ 8.75 ( to be paid by the option holder to convert LACO to LAC before 30/12/04), results in an LACO value of $ 14.89 just before conversion!!  
Assume that the base value of LACO on 30/12/00 is the present value of $3.30. To be worth $ 14.89, it has to compound by  45.8% per year to conversion date.
Therefore, LACO could be worth on:
Date       30/12/01      30/12/02     30/12/03   29/12/04
Value ($)   4.81            7.02           10.23        14.89
NB: Obviously, in reality, these prices won't rise in such a regular fashion!    

Contents of this email are my opinion. This could change. Accuracy or completeness cannot be guaranteed. Any claims for damages arising from reading of, or communicating the contents of this email to others, will not be accepted. No one is asked to buy, hold or sell shares in any company, trust or any other instrument. To do so will be at the reader's own risk.

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