Industry Reports

Deutsche Bank Reports Summaries

070226 Deutsche Bank Report - TIN Transformation Plan

Deutsche Bank - Equity Research

Temple-Inland {Ticker: TIN.N, Target Price: USD 70, Recommendation: Buy}.

Splitting off into 3 companies & selling timberlands They're going to do it.  Temple-Inland has announced a plan which will have the firm spin-off (on a tax-free basis) its financial services and real estate operations as well as selling 1.7MM acres of timberland.  After the transactions, TIN will be focused squarely on corrugated packaging and building materials. 

What could TIN be worth on this basis? 

Our current published asset valuation on TIN is $75/share.  With a reorganization plan now in place, we expect to refine those numbers.  If anything, we think our asset values have been skewed to the conservative side.  For example, we think our $1.9B value on Temple's timberland will almost certainly prove too cautious. 

This deal will accelerate events at Weyerhaeuser. 

We also believe today's news is positive for Weyerhaeuser holders.  The big Tacoma, WA firm will now be the last publicly-traded forest products firm clinging to the integrated model.  This deal will accelerate Weyerhaeuser's restructuring and force it to make some big decisions sooner, rather than later. 

Valuation/Risk

Our $70 price target is based primarily on TIN's very high net asset value, which we have been estimating at $75, based on assumptions which we think are conservative.  We have set a price target slightly below our asset value to account for near term cyclical pressures in TIN's primary businesses.  Common industry risks include momentum in the economy, a reversal in the decline of the US dollar, capacity growth abroad, and higher energy costs. Because of its financial services business, Temple-Inland also faces other risks including higher interest rates, a slowing housing market, and credit defaults.