I am new to this name, but I can see there has been a running dialogue of sorts. DM&E is private. How is it possible to value the 13% stake held by FSTR without knowing its financial performance or analyzing a recent transaction? What is the FSTR business worth on a standalone basis - excluding DM&E? Lastly, are the reported backlog #'s useful for projecting revenue? Q4 backlog dropped by 17% from 3Q.
I suggest listening to FSTR's Q4 conference call available through Yahoo or their site. They discuss backlog and its implications and expectations for future performance.
DM&E valuations are difficult but there is enough information available to come to an informed conclusion. $200m+ in revenue has been reported in the press - carloadings, etc. are reported in different locations and are also available (or were) on DM&E's site. Using similar margin assumptions given their reported traffic mix and mileage will get you close. Apply comparable public multiples (Fortress' acquisition of RRA being the most relevant) and come up with a valuation in excess of $1B on a regional rail basis - not incl their PRB project which will add more). It was also reported in the press during the FRA application process that DM&E was insured for $1B or more. DM&E's insurance company AON testified before the FRA to this particular point. Not precise, but an indication of value as well.
The vast majority of current value in FSTR is its DM&E holding. This is one of the best asset play stories in the sector and a growth play on the rail industry.