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Gold/Mining/Energy : TD - Toronto Dominion Bank -- Ignore unavailable to you. Want to Upgrade?

To: Eman03 who wrote (143)	4/12/1999 5:21:00 PM
From: Paul Butler	Read Replies (2) \| Respond to of 358

Let's see how this looks... The booming valuation of online brokers may not be getting fully reflected in the shares of Toronto-Dominion Bank, owner of Waterhouse Investor Services, the No. 2 online broker behind Charles Schwab. Toronto-Dominion rose 7 1/8 last week to 53 7/8, but its gains paled in comparison to those of E-Trade Group, Ameritrade Holding, Schwab and Donaldson Lufkin & Jenrette, which owns online broker DLJ Direct. ETrade jumped 29 1/4 to 90 1/8 ; Ameritrade surged 53 to 111 9/16; Schwab advanced 31 3/4 to 126, and DLJ was up 18 9/16 to 86. Morgan Stanley Dean Witter, owner of online broker Discover, rose 11 9/16 to 111 1/2 . On Thursday, Mark Maxwell, an analyst at CIBC Wood Gundy, the Canadian brokerage firm, lifted his price target on Toronto Dominion to 66 (the stock trades on both the Toronto and New York Stock Exchanges). But Maxwell's price target could be conservative given current valuations of ETrade and Schwab. One institutional investor figures Toronto-Dominion's stock is worth 75. Toronto-Dominion said earlier this month that it plans to sell the public a 10% stake in its global discount brokerage business, to be called TD Waterhouse, which will include Waterhouse and the bank's sizable discount brokerage operations in Canada, Britain and Australia. The deal could come as early as mid-year. Here's the math on Toronto-Dominion: At its current share price, the firm has a market value of $16 billion. Its Canadian banking operations are probably worth around $10 billion based on the P/E multiples accorded other Canadian banks. This means Waterhouse is effectively being given a $6 billion valuation. This is less than the market capitalizations of either Ameritrade, with $6.5 billion, or ETrade, at $10.8 billion. Both have considerably smaller operations than Waterhouse, whose 1.2 million active U.S. accounts far exceeds ETrade's 676,000 and is more than three times Ameritrade's account base. Industry leader Schwab now is valued at $51 billion, not far behind American Express at $57 billion. Waterhouse is more Schwab-like in its business, what with its mutual-fund arm, its sizable client assets, and its margin-loan operations. Using several valuation methods, including annualized revenue and account roster, Waterhouse may be worth $12 billion -- $14 billion based on the current prices of its peers. This valuation would imply that Toronto-Dominion's stock is, in fact, worth around 75. Some might argue that Waterhouse should trade at a discount to the online group because of two factors: Toronto-Dominion plans to keep control of the business, and it's difficult to do tax-free spinoffs in Canada. Waterhouse, incidentally, is profitable, having earned around $32 million in the December quarter. The valuations of discount brokers may be wacky, but Toronto-Dominion seems to have the least crazy price. At a minimum, this should endow Toronto-Dominion with better downside protection than E*Trade or Ameritrade if the group collapses. The Waterhouse story isn't well known among U.S. investors because the vast majority of Toronto-Dominion's stock is held by Canadians. That could change once Waterhouse files a preliminary prospectus later this month and company executives begin to make their case to U.S. investors.