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NEW YORK?Stocks may be getting beaten up like
crazy, but investors still remain crazy about the spinoff
craze. And more and more, the hunt goes on for stocks
of companies with hidden, fast-growing businesses that
can be spun off and fit into the New Economy mold.
The investment view here is that the eventual spinoff
should appreciably boost the parent company's stock.
That's what this craze did for 3Com (COMS) with the
spinoff of its Palm (PALM) hand-held organizer
business, although the hefty decline in the technology
sector has knocked both stocks down sharply from their
52-week highs.
Still, there's no escaping the lure of the exciting spinoff.
One pro who is captivated by spin-off mania?namely,
those businesses that make sense as split-offs from
their parents?is special situations analyst Sven
Monberg of Star Securities.
In this context, he is encouraging clients to snap up
Delphi Automotive Systems Corp. (DPH), the
world's largest maker of auto parts and itself a spinoff
of General Motors (GM).
Delphi, whose customers include every major
manufacturer of automobiles, is currently trading at 17
5/8 and Monberg sees the stock hitting 28-30 in the
next 12 months.
In a telephone chat, Monberg told me he feels Delphi
has a New Economy gem in its mobile multi-media
division, which offers a combination of
global-positioning satellite capabilities with cell phones
and rear-seat entertainment systems.
Among other things, Delphi's multi-media products
enable car drivers to access maps of any city, as well
as local addresses; to tune into hundreds of radio
stations, and to provide occupants of the back seats
with a variety of entertainment, including video games.
"What we're talking about is a massive adaptation of
electronics to the auto business," says Monberg, who
believes that investors do not realize the enormous
potential of this activity.
Actually, this phase of Delphi's business is relatively
new for the company, which launched it in June 1998.
Already, through, it's booming, with the division having
booked nearly $3 billion worth of business.
Monberg says he has no idea when Delphi may spin off
its mobile multi-media operation, but he points out that
the company has already said it is considering an initial
public offering of the business.
The analyst believes such an IPO would be greeted
warmly, given this division's sizable prospective growth,
which he pegs at more than 20% annually in both sales
and earnings over the next 3-5 years.
"I think if Delphi spun off this business tomorrow, it
would quickly add about five points to the price of its
stock," Monberg says.
Last year, Delphi earned $1.95 a share on sales of $29
billion.
Monberg's 2000 outlook: earnings of $2.10 a share on
sales well north of $30 billion.
Meanwhile, Delphi got some cheerful tidings yesterday
from J.P. Morgan Securities. It initiated coverage of
the company with a long-term buy rating and a $21
price target. |
