Stock Valuation ModelsMr. McRae told me earlier this year that Bay Street analysts tell him the market places zero value on Animal Health. All the value is for Urocidin.
I disagree with McRae. My valuation model (4.3x revenue for Animal Health) suggests the market values ONLY Animal Health and assumes zero for VMC and Urocidin. I assume the Market has been disappointed by management so many times, they now will only pay for values that are crystalized by a signed contract backed up by a certified cheque. Until we sell or rescue the VMC, they say its worthless. Until we get an upfront payment from a Urocidin partner, they say that too is worthless. (I disagree with the market, but the institutions have more money than I do, so they win.)
Either McRae is right or I am right. One of us in wrong. But it will make a big difference to where the stock will trade after the announcement of the sale of Animal Health. If I'm correct, the stock price will rise TO the amount of the dividend specified in the Settlement Agreement Contract dated Sept 11, 2013. (i.e., selling price for AH - $75m - 10%). Right now, I'm forecasting 48 cents per share. If McRae is correct, the price will rise BY the amount of the dividend, so it will become 37 cents + 48 cents = 85 cents per share.
Caution: McRae was frequently wrong. I recommend you bet on my model.