Tyco stock price was down over one dollar yesterday, which made its stock more interesting. Got up this morning at 1:15 am and did more research on the equity. I like what I have seen, so bought the stock at the opening.
As an international conglomerate Tyco's stock just hitted two years low. It has a market cap of over $50 billions (it varies each day) and had sales revenue of $40 billion for fiscal year 2005, $12 billion was from its electronics division; Fire and Security services contributed $11.5 billion; Health Care provided $9.6 billion; Engineered products added $6.5 billion. The compnay had a disvestiture of its plastic/adhesives operations a few years ago. Yesterday the company reported its earning of .39 per share excluding charges, which was one cent better than Wall Street expected, but its FCF (free cash flow) was $374 million, down 52% than the same time last year. Even so Tyco generated FCF $6.1 billion in fy 05, which topped 15% of the sales. Its long term debts and liabilities include $7.4 billion net debt assuming $2 billion convertibles are to be converted to stocks, $1 billion for fees, $2 billion for underfunded pensions, $2 billion guestimate litigation exposure, offsetted by $1.5 billion in the previous net operating loss carryforward, total about $11 billion. Tyco shall be able to cover its interest expenses with its cash 6-7 times! With its debt/equity ratio of 28%, it has a very strong balance sheet.
Last month Tyco had indicated to break itself up to three individual, publicly-traded companies. Since its divisions have their own distribution channels, cost structures, and different product mixes respectively, I personally consider this breakup a bullish sign to maximize its intrisic values and make each smaller companies a relatively easy takeover candidate. By the way, each individual company will remain to be its market leader. Per some Wall Street estimates, the breakup value will be $34-$36 per share. Who knows?? only time will tell. The breakup timetable will be the beginning of 2007, subject to shareholders approval. I have voted yes today.
