Deutsche Bank Comments on Rumored Hertz (HTZ) HERC Spiin-Off
Deutsche Bank maintained a Buy rating on Hertz Global (NYSE: HTZ) with a price target of $33.00. Comments follow rumors the company plans to announce a spin-off of its HERC unit.
Analyst Chris Woronka said, "HTZ currently trades at a 320bps discount to pure play car rental company Avis (CAR) on a Consensus 2015E P/E basis, and a discount of approximately 200bps on a Consensus 2015E EV/EBITDA basis. We believe a meaningful portion of that disparity can be attributed to the inclusion of HERC within the HTZ enterprise."
"HERC generated $576m of EBITDA in 2013, which representedapproximately 35% of HTZ's total company-wide EBITDA in 2013 (on a reported basis). Determining the precise multiple that a $4.5bn valuation implies for the business depends somewhat upon how much corporate level debt can be attributed to HERC. If HTZ does indeed separate HERC in one form or another, we believe the general expectation is that the resulting proceeds would be used for some combination of debt reduction, share repurchase, and/or dividends (one-time special and/or regular quarterly). We would reiterate the importance of tax efficiency when thinking about the potential amount of accretion to shareholders. A spin-off of HERC would also be expected to reduce the absolute level of required capital outlays within the legacy car rental division, which in turn could boost ROIC on a go-forward basis," he added.
For an analyst ratings summary and ratings history on Hertz Global click here. For more ratings news on Hertz Global click here.
Shares of Hertz Global closed at $25.98 yesterday.
Analyst Chris Woronka said, "HTZ currently trades at a 320bps discount to pure play car rental company Avis (CAR) on a Consensus 2015E P/E basis, and a discount of approximately 200bps on a Consensus 2015E EV/EBITDA basis. We believe a meaningful portion of that disparity can be attributed to the inclusion of HERC within the HTZ enterprise."
"HERC generated $576m of EBITDA in 2013, which representedapproximately 35% of HTZ's total company-wide EBITDA in 2013 (on a reported basis). Determining the precise multiple that a $4.5bn valuation implies for the business depends somewhat upon how much corporate level debt can be attributed to HERC. If HTZ does indeed separate HERC in one form or another, we believe the general expectation is that the resulting proceeds would be used for some combination of debt reduction, share repurchase, and/or dividends (one-time special and/or regular quarterly). We would reiterate the importance of tax efficiency when thinking about the potential amount of accretion to shareholders. A spin-off of HERC would also be expected to reduce the absolute level of required capital outlays within the legacy car rental division, which in turn could boost ROIC on a go-forward basis," he added.
For an analyst ratings summary and ratings history on Hertz Global click here. For more ratings news on Hertz Global click here.
Shares of Hertz Global closed at $25.98 yesterday.