Benzinga's Initiation Summary for June 6, 2012
Listed below are today's Top Initiations covered by Benzinga:
Morgan Stanley comments, "EDG is exposed to the most promising trends. We favor EDG's more specialized approach, focusing on just 14k SKUs vs. 150k offered by MRC. About 25% of EDG's sales comes from int'l upstream offshore projects, driven by demand for drilling and new jackup rigs amidst a seasoned fleet with an average age of 30 years. Another ~60% of EDG's sales comes from US upstream and midstream end-markets, of which 85% is related to shales. This compares to MRC which derives just 50% of its US upstream and midstream from shales, with minimal offshore exposure."
Morgan Stanley says, "MRC … derives just 50% of its US upstream and midstream from shales, with minimal offshore exposure. …While there are no direct comps to … MRC, we used industrial distributors with similar margin profiles and cyclicality, which have historically traded at an average multiple of 7.5x 12-mo forward EBITDA. We value MRC at $27 (30% upside) by applying a multiple of 7x, a modest discount due to MRC's higher debt profile."
Jefferies comments, "We expect the capital spending in Oil & Gas to last a couple more years and benefit for EDG's businesses. Combined with expected margin expansion, we see strong EBITDA and EPS growth in 2012-13. We consider EDG's valuation compelling. Jefferies acted as a joint bookrunner for EDG's initial public stock offering completed on 4/30/12."
Citigroup says, "As a distributor of specialty steel products to companies across the global energy supply chain, EDG should benefit from higher levels of capital spending on energy-related infrastructure. We believe these strong fundamentals provide a compelling investment opportunity in light of the stock's significantly discounted valuation versus its peers."
Drexel Hamilton notes, "Allstate sells at 85% of book value and at less than 10x next year's projected earnings, with a dividend yield of 2.7%. We project $4.12 in operating EPS for 2012, assuming moderate CAT loss experience as compared to large CAT losses in 2011; we further estimate operating EPS of $4.27 for 2013. Our target price is $37, based on assumed 85% multiple of projected 2013 book value of $43.62. We are initiating with a Hold rating, with the stock trading close to its recent high."
All of Benzinga's Initiation coverage can be viewed here.
(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.