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Oscar Gruss Starts Regis Corporation (RGS) at Buy; More Likely a Bad Haircut Than Premature Baldness

October 3, 2011 4:20 PM EDT
Get Alerts RGS Hot Sheet
Price: $7.19 +4.51%

Rating Summary:
    4 Buy, 4 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 13 | Down: 10 | New: 11
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Oscar Gruss initiates coverage on Regis Corporation (NYSE: RGS) with a Buy. PT $17.00.

Oscar analyst said, "RGS has been targeted by the Starboard Value and Opportunity fund (“Starboard”), an activist shareholder. Starboard has three nominees for directors at the 2011 RGS annual meeting. The non-staggered Board has seven directors. Starboard believes value can be enhanced by selling non-core assets, reorganizing the hair operations and reducing corporate overhead. We agree with this strategy but do not believe it will be a quick process; RGS has been a long time acquirer of hair salons. A strategic buyer for RGS is unlikely; private equity may only want to look at non-core components due to the sluggish trends in hair salon revenue over the past three years. RGS’s current CEO will become Executive Chairman in 2012; the President will succeed him as CEO. We believe he may be more amenable to some of Starboard’s ideas, especially if their nominees win some Board seats. RGS still generates significant free cash flow; it was able to increase its quarterly dividend in 2010 (from $0.04 to $0.06). We believe divesting non-core businesses and a more focused operating approach should benefit the stock price near term until revenues once again trend positive on comparable sales basis."

For more ratings news on Regis Corporation click here and for the rating history of Regis Corporation click here.

Shares of Regis Corporation closed at $14.09 yesterday.


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