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Non-Tech : SPIN-OFFS "secret hiding places of stock market profits" -- Ignore unavailable to you. Want to Upgrade?

To: voodooist who wrote (351)	11/11/1999 9:36:00 PM
From: Stewart Whitman	Read Replies (4) \| Respond to of 1185

Fred, I'm one of those shareholders that's been holding some PTV/TEN for the last 50% drop, so you should probably take my advice with a grain of salt. On PTV: Price ~ $11 Shares ~ 175 million Mkt. Cap. ~ $1925 million Sales ~ $3000 million LT. Debt ~ $800 million Op. Cash Flow ~ $300 million The debt figure is assuming they can sell their interest in PCA (Packaging Co. of America) via an IPO. Their earnings are dwarfed by their depreciation and amortization, so the actual net income ends up being around $75-$100 million (~$0.50 EPS) - cash flow is the important measure (IMO). They have a division with good potential in their plastic and fiber protective/flexible packaging segment (about 1/4 of their sales) - high margins, good growth, etc.. My rough estimates for growth are about 9% CAGR in revenue (including acquisitions). PTV is forecasting some short term (1Q) problems in margins followed by improvements next year. biz.yahoo.com On TEN, Price ~ $8 Shares ~ 35 million Mkt. Cap ~ $280 million Sales ~ $3,200 million LT Debt ~ $1,500 million (my estimate) This is a company that effectively earned about $2.50 EPS last year and about $5.00 EPS in 1998. They're forecasting 10% CAGR in EPS from 5% revenue growth. Because of some changes in debt, I'm can't make a real good estimate of earnings, but I wouldn't be overly surprised at $2+ EPS next year. The company sees a slowdown in NA, but they may also get some improvement in Europe and Asia. biz.yahoo.com biz.yahoo.com Both companies have good name-brand recognition - Hefty, Baggies, Monroe, Walker. To be quite honest, I never though that either division would get anywhere near this price. I honestly think that TEN is worth about ~0.3 times sales (like many other auto parts manufactures). That would be a stock price around $27 (which seems quite ridiculous at this point). PTV I think is worth around 10x cash flow or 1x sales which would be about $18. I remember last year when auto-parts analyst were hoping that the auto-parts division would be sold for around $2-$3 billion. It's really difficult for me not to believe its worth a larger fraction of that price now (then again, that was when TEN itself was worth ~$6 billion). On the flip side, Tenneco's financial discipline has been all over the place - inconsistent performance from year to year and quarter to quarter, write offs, overstocking problems in the auto-parts area last year, etc.. That's something that could improve due to the spin-off. Also, the debt levels (especially for TEN) are quite high - that's something you need to consider for yourself. Regards, Stew