Deutsche Bank Raises Price Target on Temple-Inland (TIN) Following International Paper's (IP) Offer
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Price: $31.99 --0%
Rating Summary:
1 Buy, 5 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 6 | New: 26
Rating Summary:
1 Buy, 5 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 6 | New: 26
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Deutsche Bank is reiterating its Buy rating on shares of Temple-Inland Inc. (NYSE: TIN) and is raising its price target from $28 to $36 following International Paper's (NYSE: IP) announcement to purchase all outstanding shares of TIN for $30.68.
The firm believes that a deal will be made in which IP acquires the share in the mid $30 range.
Deutsche's valuation is based on a sum-of-the-parts (EV/EBITDA) valuation.
An analyst reports, "For Corrugated Pkg, we apply a 6.6x multiple to our FY’11 EBITDA estimate of $450MM = $3.0B. For Building Products, which is currently operating at cyclical trough levels, we use a normalized EBITDA contribution of $125MM. Assuming normalized conditions will arrive in 3 years, we apply a 5.0x multiple to the present value of this contribution (~$100MM), suggesting a value of ~$500MM for the BP business. We also assume ~$300MM in annualized synergy benefits from the IP/TIN deal in roughly 3 years. If we capitalize this at 5.0x, using the present value of these synergies (~$238MM), the incremental value will be ~$1.2B. Thus our combined total EV = $4.7B ($3.0B+$0.50B+$1.2B). Deducting $737MM in net debt, we get an equity value of $3.97B or $36/share on a share count of 110.3MM shares."
For more ratings news on Temple-Inland Inc. click here and for the rating history of Temple-Inland Inc. click here.
Shares of Temple-Inland Inc. closed at $30.75 yesterday.
The firm believes that a deal will be made in which IP acquires the share in the mid $30 range.
Deutsche's valuation is based on a sum-of-the-parts (EV/EBITDA) valuation.
An analyst reports, "For Corrugated Pkg, we apply a 6.6x multiple to our FY’11 EBITDA estimate of $450MM = $3.0B. For Building Products, which is currently operating at cyclical trough levels, we use a normalized EBITDA contribution of $125MM. Assuming normalized conditions will arrive in 3 years, we apply a 5.0x multiple to the present value of this contribution (~$100MM), suggesting a value of ~$500MM for the BP business. We also assume ~$300MM in annualized synergy benefits from the IP/TIN deal in roughly 3 years. If we capitalize this at 5.0x, using the present value of these synergies (~$238MM), the incremental value will be ~$1.2B. Thus our combined total EV = $4.7B ($3.0B+$0.50B+$1.2B). Deducting $737MM in net debt, we get an equity value of $3.97B or $36/share on a share count of 110.3MM shares."
For more ratings news on Temple-Inland Inc. click here and for the rating history of Temple-Inland Inc. click here.
Shares of Temple-Inland Inc. closed at $30.75 yesterday.
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