Industry Reports

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070425 Deutsche Bank Report - Temple-Inland's 1Q in 100 Words

Deutsche Bank - Equity Research

Temple-Inland {Ticker: TIN.N, Recommendation: Buy}.

Pointing to EPS of $0.43, net of special items.  DB @ $0.40 & FC @ $0.47.   EPS penalized $0.04 in stock-based incentive comp costs.  RE was weaker than expected, but we were pleasantly surprised by forest prod's and pkg.  No change in view.

Analysis (1) Box vol's seeing “above normal” seasonal pick-up; in line with reported market tightness, (2) Transformation plan complete by YE07, (3) Timberland sale underway - - - DB trade sources suggest completion by Labor Day.

Change in View?

No.  Housing-related bus's are in cyclical downturn (a well-known fact).  To own this stock, investors must believe: (1) further operational gains remain, (2) market for TIN's assets remains strong, (3) Jastrow & Co. determined & able to extract maximum value for shareholders.  DB believes #'s 1-3.  Maintain Buy.  2007 EPS trimmed from $2.05 to $2.00, 2008 is unchanged @ $2.75.

Valuation/Risk

Our price target is based on TIN's high net asset value, which we now estimate at $85/share.  We have set a price target below our asset value to account for near term cyclical pressures in TIN's primary businesses.  Temple-Inland's primary risk is that the economy stalls, putting renewed pressure on commodity prices. Other common industry risks include a reversal in the decline of the US dollar, capacity growth abroad, and higher energy costs. Temple- Inland also faces other risks including higher interest rates, a slowing housing market, and credit defaults.