I won’t lay out all the math in this post, as it involves a whole slew of assumptions about how much of each Schering product’s revenue for all of 2008 comes from countries with newly shifting currency-headwinds — as well as some estimates of what the effects of the “natural hedging” in those currencies would likely be. That is, I’ve estimated how much the currency headwind effect would be dampened by the fact that Schering actually holds assets — property, plant and equipment — in those countries. And, I’ve “baked in” the just-released Q3 results.
Next, I’ve “repatriated” a linear amount of full-year 2008 earnings to the United States — and paid taxes on them — again, taking into account the much-less favorable euro exchange rates, now prevailing in the For Ex markets.
In more placid times, one would next simply accrete that figure to the current price per share of Schering, and derive a 2008 year end per share value. Not so, in these extraordinary times. Forgetting Schering’s own unique woes, we must now contend with market-wide, systemic uncertainties — uncertainties not seen in at least 30 years (and perhaps, not seen in 80 years). . . .
No, in these uncertain capital markets, a prudent investor would look at what the net hard assets are worth per share (assuming alomost no “going concern” value), plus say 20 percent, then layer back in 2008 earnings, as calculated above.
When I do all of that, I come up with a new “hard-rock bottom” price per share for Schering common stock of just over $10 per share — $10.13, to be precise.
I think I can very safely say that if Schering hits $10 per share, it is a buy. Above that price, I would not be comfortable declaring it a buy. In fact, I would not want to hold it above that price. Said another way, I still see about $2 of shorting opportunity here — or another quick 20 percent to be made — by the bold among us.
As I post this, Schering is trading down, in an up market (Merck is rising, as well!) — the Real Time ECN pegs SGP at $12.55 per share. [At noon-time, SGP hit $12.09 — after I posted this — down over 16 percent in two days.] Ouch.
Your opacity is causing your pain at the moment, Mr. Hassan.