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Non-Tech : Tyco International Limited (TYC) -- Ignore unavailable to you. Want to Upgrade?

To: JRI who wrote (284)	10/20/1999 8:53:00 AM
From: Director	Respond to of 3770

ML's Focus 1... Investment Highlights: We are adding Tyco International to the Focus One list as the top pick in our multi-industry universe. We expect the stock to benefit from strong internal growth, significant profitability gains, the redeployment of strong free cash flow into accretive acquisitions and continued EPS growth at an accelerated pace. We view the recent pullback in the shares as a major buying opportunity for the shares. We believe that a $150 price objective on Tyco International's shares is a very realistic expectation within 12 months. Fundamental Highlights: In our view Tyco International has the best fundamentals and business mix of any company we follow. With a strong balance of recurring revenues and long-term contracts, we believe that Tyco is well positioned to continue growing earnings regardless of the macro environment. Its businesses generally have leading market shares, which are continuously being strengthened via internal and external means. The management team is highly incentivized to grow EPS and cash flow. It Doesn't Get Any Better Than This! Tyco International common is our top pick! We recommend purchase of the shares. Given the strong business mix, the anticipated steady earnings growth from internal and external sources, increasing profitability, the strong management team, and the excellent cash flow that is used for accretive acquisitions, we believe the shares are significantly undervalued. We believe that as Tyco International continues to demonstrate exceptional fundamental performance over good times and bad, the potential for stock price appreciation and an upward revision in its relative valuation are significant. We believe that Tyco International's 20% plus internal EPS growth alone is likely to be substantially more than what the overall equity market average has to offer. In addition, its strong free cash flow, estimated to be over $3 billion including AMP and Raychem in fiscal 2000, should result in accretive acquisitions. We believe that the drivers to further stock price appreciation will be a continued strong EPS growth rate and the perception that Tyco International can grow EPS through an economic downturn. In addition, further improvement is warranted in the absolute and relative valuations, in our opinion. n Valuation Has Upside Potential On conservative calendar 2000 assumed EPS of $4.10, Tyco International's shares are selling at a P/E of less than 20 times earnings, or only 73% of the market multiple. Over time, we believe that Tyco International has the potential to garner a valuation like that of General Electric. We believe that a $150 price objective on Tyco International's shares is a very realistic expectation within 12 months. Company Description Tyco International Ltd. is a diversified manufacturing and service company. It is the world's largest manufacturer and installer of fire and safety systems, the largest provider of electronic security services in North America and the United Kingdom and has strong leadership positions in disposable medical products, packaging materials, flow control products, electrical and electronic components and underwater telecommunications systems. Tyco International operates in more than 80 countries around the world and has expected fiscal 1999 revenues in excess of $22 billion.