Credit Suisse said it also raised its price targets on aluminum companies Alcoa Inc.
The brokerage, in a research note, raised its price target on Alcoa to $42 from $35.
Credit Suisse said it also raised its price targets on aluminum companies Alcoa Inc.
The brokerage, in a research note, raised its price target on Alcoa to $42 from $35.
BARRON'S
By Tom Sullivan
If Australia's BHP Billiton or Britain's Rio Tinto hopes to buy Alcoa, the
American aluminum giant, as was rumored last week, they might have to pay a lot
more than $40 billion -- the price tag attached to the rumors. Sure, that tab
would represent a 33% premium to Alcoa's current $30 billion market value, but
it doesn't begin to reflect the turnaround afoot at the Dow industrials
component.
Barron's has been a fan of Pittsburgh-based Alcoa for some time (see "Alcoa's
Shiny Prospects," Aug. 8, 2005, and "Pricing Outlook Bright for Alcoa," Jan.
22, 2007). Yet the stock, for all its gyrations, did little from the date of
our first story, when it traded at 28, until this January. Indeed, Alcoa (AA)
has returned just 4%, dividends included, in the past five years, compared with
North American rival Alcan's (AL) total return of 65%.
Tuesday, Alcoa jumped as much as 10%, to 36.05, on takeover speculation, but
ended the week around 34.50, suggesting Wall Street sees no deal in the offing.
That would suit John Buckingham, manager of the Al Frank Fund (ticker: VALUX),
fine. "The ship is sailing the right course," he says, "but this is not the
time to be selling the company."
Buckingham, whose firm owns 162,000 Alcoa shares, understands why BHP and Rio
Tinto might be interested in a deal, especially at a bargain price. After all,
he says, "the ugly duckling is now a swan." But he views a bid of $55 a share,
or about $48 billion, as a much fairer price for Alcoa holders. Alcoa has
dismissed the takeover talk, while BHP and Rio Tinto didn't comment.
An acquisition of Alcoa would help both BHP (BHP), which calls itself the
world's largest diversified-resources company, and Rio Tinto, an international
mining concern, consolidate their positions in the aluminum industry. Aluminum
has underperformed other metals, in part because China produces 30% of the
world's supply. But the market has found support from commercial construction
and the transportation/aerospace sectors, CreditSights said in a recent report.
Investors in Alcoa, which makes Reynolds Wrap, Dura-Bright car wheels and
Spout Pouch beverage containers, as well as aluminum for industrial uses, can
expect to benefit. The company is likely to earn $3.03 a share this year,
compared with last year's $2.96. Alcoa trades for 11.4 times '07 estimates and
yields 2%.
In January, Alcoa announced plans to buy back up to 10% of its shares, in
part via debt. That prompted credit-rating agency Standard & Poor's to lower
its rating on Alcoa to triple-B-plus -- two notches below the rating the
company's debt received from rival Moody's Investors Service.
Yet the yield margins, or spreads, on Alcoa's bonds narrowed a bit in active
trading after the takeover reports surfaced; the company's 5.95% bonds due 2037
narrowed by three basis points (a basis point is 100th of a percentage point)
to 106 basis points over Treasuries with comparable maturities. That's despite
talk that the deal might be done as a leveraged buyout.
"It's a doable deal," says Eric Tutterow, managing director at Fitch Ratings,
implying Alcoa is not too large to be swallowed. "With a name like that . . .
there would be a lot of support in the high-yield and leveraged-loan markets."
A $40 billion acquisition would trump last year's record $39 billion buyout
of Arcelor by the Netherlands' Mittal Steel (MT). But Alcoa shareholders could
be counting even more millions before any deal is done.
| MarketWatch 3:42 p.m. 02/07/2007 By Frank Barnako Something's happening here. Apple Inc.'s computer-meister is plotting something big. Really big. Like ... maybe ... new Beatles tracks we haven't heard ... which will be sold through iTunes and will not be protected by digital rights technology. |
| There was much speculation Apple (AAPL) would use last month's MacWorld to announce the addition of Beatles music to iTunes. Instead, Steve Jobs held up an iPhone, loaded with Beatles tunes, while Beatles graphics and music play onstage. Presumably the tracks came from his CD collection. (Yeah, right!) |
| Apple Recon has also reported there will be some sort of Apple "event" on Feb. 20. This has not been confirmed by the company. (In an earlier version of this post, I said the company had formally scheduled an announcement for the end of the month. I was wrong.) There is lots more speculation about Apple and that date here. |
| LAS VEGAS, Jan 31, 2007 /PRNewswire via COMTEX/ -- A Nevada resident became a multi-millionaire this afternoon when his penny investment paid off on Penny Megabucks(R) at the Pahrump Nugget Casino. He hit the MegaJackpot(R) for $18,799,414, the largest penny slot jackpot ever won. |
| "On my way over to the casino this morning," said the anonymous 66-year-old man, "I actually thought about playing Penny Megabucks(R). I don't know why because I normally play video poker. So after rolling several practice games, I went to have lunch and on the way back to the lanes, I stopped to play Penny Megabucks(R)." |
| "I put in $100 and after playing $44, I saw five eagles line up and thought I had won about $3,000," he added. "Then I looked up, and the large jackpot on top of the machine had switched from $18 million to $10 million. Then I knew I had won something big." |
| In the meantime read this... TIMET Announces New Long-Term Supply Agreement and Sale of Joint Venture Interest |
DALLAS, Jan. 2 /PRNewswire-FirstCall/ -- Titanium Metals Corporation ("TIMET") (NYSE: TIE) today announced that it has completed the sale of its 43.7% interest in Valtimet SAS, a manufacturing joint venture between TIMET, ValTubes SAS, Sumitomo Metals Industry and Sumitomo Corp formed in 1997 for the manufacture of welded stainless steel and titanium tubing. TIMET had contributed its wholly owned titanium tubing facility to the Valtimet joint venture in 1997. ValTubes SAS acquired TIMET's interest in Valtimet SAS for $75 million cash and TIMET will report a pre tax gain on the sale of its interest in Valtimet of approximately $39 million in its fourth quarter results. TIMET and Valtimet also entered into a new long-term agreement pursuant to which TIMET will supply up to 2,500 metric tons of titanium strip annually to Valtimet for use in the manufacture of welded titanium tubing. Steven L. Watson, TIMET's Vice Chairman and Chief Executive Officer, said, "This sale transaction allows us to monetize our minority non-controlling joint venture interest position in Valtimet at an attractive value and redeploy the proceeds into expansion of our productive capacity or other growth opportunities in our core and emerging business segments that we believe will provide the opportunity for an increased return on investment. The new supply agreement provides us the opportunity to continue to participate in the welded tubing market segment on attractive terms. After application of the proceeds of the sale to pay down our bank borrowings, we will have no net debt. We have a strong balance sheet and significant sources of capital and liquidity to allow us to capitalize on capacity expansion projects across all stages of our production process and invest in other growth opportunities as we continue to respond to the long-term positive outlook across major current and emerging markets." |
In an aggressive attempt to shore up oil prices, the WSJ reports that Saudi Arabia -- which has already dropped its oil output -- will cut production a further 158,000 barrels/day effective Feb. 1, bringing its total cuts since last summer to 1 million b/d. This is nearly double the total cuts it agreed to during OPEC summits, and brings its output to "around 8.5 million b/d." Saudi oil officials say more cuts are on the way, but have been careful not to pinpoint a price target. Roger Diwan, an analyst at PFC Energy, a Washington industry consultancy, says this: "They are defending prices from falling below $55 quite aggressively... The Saudis, they don't talk a lot, so look at what they do, and that will give you the whole story." Yesterday crude traded down $1.41 to $54.01/barrel when the outgoing Saudi ambassador to the U.S. said current price levels are "adequate to meet the requirements of producing and consuming countries," and dismissed speculation that Saudi Arabia was trying to drive prices down in order to hurt Iran's export revenues.
| Titanium: Alcoa credited robust demand from the aerospace industry where production is "expected "to remain near historic highs for several years to come." |
| ATI, RTI, TIE: Aerospace products producers rallied with Alcoa. |
Breaking with Apple's tradition of not announcing unreleased products, Steve Jobs said that the company will release a wireless, set-top box for the TV called iTV. It will be approximately half the size of the Mac mini, and the iTV will feature Ethernet, 802.11g, USB ports, component video, optical audio, and HDMI ports. It will work with the Apple Remote and sport an interface much like that of Front Row.
iTV will allow music, TV shows, and movies residing on a computer to play on a television in another part of the house with what Jobs describes as instantaneous access. It is slated to ship during the first quarter of 2007 and will retail for $299.
"Apple is in your den now," says Jobs. "Apple is in your living room. Apple is in your car. Apple is in your pocket." Will Apple be in your wallet?
Also - look for exciting stuff as Macworld EXPO starts on January 8.
AAPL target $100+ in January in our opinion now that the cloud has lifted today with the scare of the options probe that was with out a doubt played out in the media by the shorts who needed to get apple's stock lower to cover at a profit!In a 10-K report filed with the Securities and Exchange Commission early Friday, Apple said it recorded $84 million in noncash expenses to account for backdated stock options.
The relatively small restatement was a BIG relief to investors, but their main cause for celebration centered around Jobs, whose future had been called into question as details of the stock option irregularities have come to light.
The filed statements with the U.S. Securities and Exchange Commission that took pains to exonerate Chief Executive Steve Jobs from wrongdoing in the company's handling of stock options from 1997 to 2002. A special committee appointed by Apple's board "found no misconduct by current management," the company said in a lengthy explanatory note attached to its yearend financial filing. That reiterated remarks made by Apple in October, and it was exactly what many investors and analysts wanted to hear. In early afternoon trading, Apple's shares got a 5% boost, to $84.93.As upbeat as the tone was toward management, the documents nevertheless underscores concerns over the way Apple handled options, which were used by many companies in recent years to compensate employees, and have become the target of widespread investigation. The practice of backdating, or changing a grant date to artificially boost the value of the option, can skew results by understating compensation costs and overstating profit.
Apple said its own probe turned up "a number of grants for which grant dates were intentionally selected in order to obtain favorable exercise prices," and that Jobs was "aware or recommended the selection of some of the favorable grant dates." Jobs "did not receive or financially benefit from these grants or appreciate the accounting implications."
Al Gore, the former US Vice-President and chairman of the special board committee, and Jerome York, chairman of Apple’s audit and finance committee, said: “The board of directors is confident that the company has corrected the problems that led to the restatement and it has complete confidence in Steve Jobs and the senior management team.”
The company admitted that it had falsified records to show that a board meeting on October 19, 2001, had approved the awarding of 7.5 million stock options to Mr Jobs. In fact, no meeting took place on that day and the records were fabricated, the company said.
The market applauded the Apple report, however, and seemed to share the company’s view that Mr. Jobs had been exonerated as the shares surged more than 5 per cent by midday on Wall Street.