Industry Reports

Deutsche Bank Reports Summaries

080206 Deutsche Bank Report - TIN's 4Q in 100 Words

Deutsche Bank - Equity Research

Temple-Inland {Ticker: TIN, Closing Price: USD 17.29, Target Price: USD 27.00, Recommendation: BUY}.

* Reducing Price Target, But TIN is Still A Good Value

After a dramatic restructuring in 2007, a new TIN has emerged that focuses on corrugated packaging and building products.  In light of additional modeling detail we are more cautious on TIN's short-term earnings trajectory.  We're trimming our '08 EPS estimate from $1.15 to $0.70, and reducing our price target to $27 from $31.  We maintain our Buy rating based on favorable valuation and a positive cyclical outlook in the corrugated packaging business.

* Disappointing Q4

EPS = $0.23/share. DB @ $0.12, FC @ $0.15.  Making adjustments to our expectations, # looks like $0.05-0.10/share.  Higher input costs, mill downtime & seasonally lower box volumes offset most of price gains in containerboard business.  In building products, both volumes & prices were lower – as expected.  

* Other issues

(1) $12MM timberland earnings – will go to $0. (2) $14MM in incremental interest income – all tied to Q4 restructuring – will go away in ‘08, (3) 28% tax rate – In '08 look for 40%,  with cash rate below 20%, (4) expected share-based comp of $26M in '08 (5) Q1 will see 24K of downtime, more maintenance expense, $5-7MM 1-time hit from Bogalusa H2O issues & limited additional price gains. (6) No clear hints on WY Packaging business. DB believes TIN & SSCC are frontrunners. 

* Valuation/risk

Our $27 price target is based on the sum of separate valuations of the Corrugated Packaging and Building Products businesses.  We value the Corrugated Packaging business at $3.1B and the Building Products business at $750MM.  Adding the two implies an EV of $3.85B and an equity value of $2.9B, or $27/share.  Key risks include momentum in the economy, US$ exchange rates, energy costs, and the housing market.