WESCAST INDUSTRIES INC WCSTF

RE: RE: Thoughts

[Drdoctor1]

thanks for your reply, I'm currently long and kicking myself for not getting in when it was 2-3.

A's are non voting.  dual share is always debatable and tough for valuation, would assume you tack on a premium when doing a valuation on the voting, but how much?  in my mind the dual class is mitigated by the proven track record of mgmt, i like that they have no debt and are expanding into new markets.

Here's a crack at value:

equity:         13MM shares x $7 = $91MM (assume same value for voting, arguably higher but again hard to quantify)
debt:              $6MM (not including $5MM restructuring amount)
less cash:     $8MM
total:                $89MM

Ebitda last q was around $6.5MM (not including the curtailment gain), i think $40MM annual is acheivable given ramp up in auto production which results in 2.25x Value / EBITDA multiple.  5x is a safe mult for this buisness which would mean a double on current share price....obviously do your own dd and would welcome criticism of mine.

I think this is pretty good upside and will be looking at Q over Q gross margin improvement to say over 15%.  think there's always the possibility of reinstating dividend as cash balance increases.  big picture here is 2009 was a brutal year for auto with production of 10MM, 2010 on pace to be significantly better, say 12-13MM and 13-14 by 2011.

Other risks however, are nature of their product (cast vs fabricated manifolds) -any insight here from the board would be appreciated, but my impression is that cars are moving more towards the latter, not to say there's no market for the former but...