Citi Starts Fortress Transportation (FTAI) at Buy
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Citi analyst Christian Wetherbee initiates coverage on Fortress Transportation (NYSE: FTAI) with a Buy rating and a price target of $40.00.
The analyst comments "After a period of restriction, we resume coverage with a Buy rating and $40 target. We continue to consider FTAI undervalued and see the recent Transtar acquisition as a step toward unlocking significant value. By acquiring U.S. Steel’s rail assets, Transtar, for $640m, FTAI improves Infrastructure’s investment profile in two key respects and enables it to be spun out later this year, which we believe supports a $40-$55/share bull case. First, Transtar diversifies Infrastructure beyond terminals and adds mature contracted EBITDA, offsetting risk within the portfolio. Second, Transtar will help Infrastructure support the $1B+ market cap that management believes is needed to be a standalone entity. Applying a 10-12x EBITDA multiple to Aviation and an 8-10x EBITDA multiple to Infrastructure supports a $40-$55/share bull case (35-90% upside). We believe one more deal is probably necessary to support the separation, but given the building progress, we see solid upside; Buy."
Shares of Fortress Transportation closed at $31.47 yesterday.
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