Tyco International Limited (TYC) Message Board

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Non-Tech : Tyco International Limited (TYC)

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To: JDN who wrote (3712)	3/19/2006 5:17:10 PM
From: rich evans	Read Replies (2) of 3770

JDN, My valuation for Tyco is $39/Share calculated as follows: 25% of business=Health--10billrevs x26%OM=$2600 EBIT 2600- $150( 1/4 total interest) =EBT. Net at 25% tax = $1.8bill / 500millshares(1/4 total of 2bill)= $3.66/share. PE of 20 = $73/share. 1/4 of that is $18 dollars. 30%=Electronics= 12000revsx 15%OM=1800 less 180 mill interest x .75(tax)= 1215 mill / 666mill shares =$1.82 x 18PE= 33 x .3= $10 45%=Fire/Security/Enginneering= 18billx 11.5%OM=$2070 -$270 interest=$1800x .75(tax)=$1350 mill /900millshares= $1.50 share x17 PE= $25.50 x 45%= $11 Total $11+10+$18 === $39share breakup value Tyco is my opinion gets bad press and misperceptions by the investment community. It is hard to project earnings with as Breen said so many moving parts. Even last quarter the FX component was large. The 10q shows how much of Tycos reported results were a result of foreign exchange(FX). Two years ago this was a big plus . Now it is a minus. Tyco's revs would have been about 10 bill or 300 mill higher without FX adjustments, And their profits would have been about 35 mill higher. Also the FAS123R stock compensation was big in Q1 december report on the 10Q. Tyco took a 75 mill hit on this in SGA versus only 20mill a year ago from their cash flow statement and 10q.. Add it all up on Tyco would have reported about 44cents a share in Q1 without these accounting and translation adjustments. On an apples to apples basis, Tyco continues to improve despite hiccups reported in imaging/ respitory in healthcare etc. The lawsuits except for the class actions are now all over basicaly. Tyco paid off 1 bill in debt on Feb15. They called the 1.2 bill converts last week. They will be paying another 1 bill in debt in the next 6 months. Their gross debt will be around 9.3 bill in 6 months. They will spend the 980mill to buy back stock next month. I agree with you that Tyco can expand their buyback program considerably and put more debt on the balancesheet. All in all Tyco's results are getting better and better. You cannot compare them to the Koz days when the tax rate of 18% was used instead of 25% now. Actually the cash taxes paid is 18% now. Plus the 200mill/year in income from dealer installation payments ($200 x 1mill customers) and the lower amortization used back then on dealer contracts and you get about 25cents a share per year in accounting differences under Swartz compared to now. Maybe the Masimo antitrust litigation judgment against Tyco for 420 mill is what is holding the stock price down. This case is on appeal right now. The judgment has not been accrued because tyco thinks they will win the appeal. (They thought the same thing on the Masimo patent case and were wrong) Others have now started consumer antitrust cases piling on to the adverse decision against Tyco by Masimo antitrust case. Keep your fingers crossed on this. Tying arrangments under antitrust law require a monopoly in the product tied to. The whole concept here seems to run counter to the PGO concept used like Novation for purchasing hospital supplies. Anyway this uncertainty is out there and affecting the stock in my opinion. Rich

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