RJR and MO have been outstanding performers this year.
check out all that insider buying this past year in
RJR back under 20. It was like when HRC insiders bought
60 million of stocks when it was between 5 and 6 1 year
ago.
biz.yahoo.com
CHTR continues to perform well. CD is a real value buy
look at this insider buying
biz.yahoo.com
CD will be a 20 buck stock in 12 months, is my thought.
got any new value picks for me??
----------
December 11, SUMMARY
2000 * According to WSJ article (12/11/00), Merrill Lynch is in
negotiations with CD to sell "the vast majority" of Merrill
GENERALIST Lynch Credit Corp (mortgage business)to CD for about $100
mil -CD managemnt had no comment regarding the article.
* ML originated $4.5 bil in '99. ML not in top 30 for
servicing&we believe much lower than 30th ranked ($17.5
bil)-CD #14 in '99 for servicing($60.7 bil)
* Merrill currently outsources its mortgage related calls to
Cendant's inbound telemarketing center (where CD originates
the mortgage in Merrill's name).
* According to the article, Merrill would continue to sell
mortgages through brokers under the "private label
agreement" with CD.
* We're assuming the $100 mil would buy Merrill's mortgage
servicing portfolio
* CD should benefit from addition of ML's servicing prtflio to
its own servicing
* CD mortgage originates, sells, and services residential
mortgage loans through outsourcing agreements &thru its
franchised brokers.
FUNDAMENTALS
P/E (12/00E) 11.2x
P/E (12/01E) 11.1x
TEV/EBITDA (12/00E) 6.8x
TEV/EBITDA (12/01E) 5.4x
Book Value/Share (12/00E) $5.73
Price/Book Value 1.8x
Dividend/Yield (12/00E) NA/NA
Revenue (12/00E) $3,869.2 mil.
Proj. Long-Term EPS Growth 13%
ROE (12/00E) 26.9%
Long-Term Debt to Capital(a) 49.0%
CD is in the S&P 500(R) Index.
(a) Data as of most recent quarter
SHARE DATA RECOMMENDATION
Price (12/11/00) $10.06 Current Rating 1H
52-Week Range $26.94-$8.19 Prior Rating 1H
Shares Outstanding(a) 762.0 mil. Current Target Price $24.00
Convertible Yes Previous Target Price $24.00
EARNINGS PER SHARE
FY ends 1Q 2Q 3Q 4Q Full Year
12/99A Actual $0.21A $0.23A $0.31A $0.30A $1.04A
12/00E Current $0.22A $0.23A $0.27A $0.18E $0.90E
Previous $0.22A $0.23A $0.27A $0.18E $0.90E
12/01E Current $0.21E $0.24E $0.28E $0.18E $0.91E
Previous $0.21E $0.24E $0.28E $0.18E $0.91E
12/02E Current NA NA NA NA $1.06E
Previous NA NA NA NA $1.06E
First Call Consensus EPS: 12/00E $0.90; 12/01E $0.91; 12/02E NA
*
INVESTMENT THESIS
**VERY GOOD BUSINESS MODEL The company has strong reported earnings growth,
and combines very good cash flow with great scale, reach, and distribution.
A great strength of the company (in our opinion) is that it is not an
operator or owner of businesses (it has low capital intensity); its assets'
brand names are valuable (as can be seen by the company's returns). **WE
HAVE A BUY RATING We have a Buy (1) rating for CD, based upon our outlook
for strong bottom line growth from continuing core businesses and the
company's excellent business model, which generates high cash flow. In
addition, CD has good potential from the convergence of on-and-off line
businesses. CD also has a large capitalization and good liquidity, combined
with a P/E below the market. **WE EXPECT AROUND 13% LONG-TERM GROWTH
We expect 5% to 7% revenue growth, combined with significant operating
leverage to generate 13% long term net income growth.
COMPANY DESCRIPTION
Cendant is a franchiser of strong consumer brands and a major provider of
consumer and business services. It owns important consumer brand franchises
and is the leading franchiser of real estate brokers (Century 21, Coldwell
Banker, ERA), economy class hotels (Ramada, Days Inn, Travelodge, etc), and
rental cars (Avis). Its internet brands include Move.com and Netmarket
(which CD has announced are being sold and spun-off, respectively). Cendant
is the result of the late 1997 merger of HFS Corp. and CUC Corp (now mostly
disposed). CD's franchise earnings come from royalties on revenues generated
from its franchised brands. It is also a substantial outsourcer (resort
timeshare management, employee relocation management, private label mortgages
for financial institutions, and check, credit card and deposit account
enhancements for financial institutions). In total, Cendant reaches about
100 million customers per year. |
