Markets & Finance

S&P Ups Placer Dome after Barrick Bid


Placer Dome (PDG) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Leo Larkin

Following an unsolicited offer by Barrick Gold (ABX) to acquire Placer Dome for $20.50 a share in cash and stock, we are upgrading Placer Dome to hold and raising our 12-month target price to $21 from $15. We estimate the combined company would have gold reserves totaling 149 million ounces, copper reserves totaling 6.54 billion pounds, and annual production of about 9.2 million ounces of gold. Also, the proposed merger would result in a much smaller exposure to South Africa than Placer Dome alone. The company has not yet responded to the offer. We do not anticipate a rival bid.

Health Care Facilities (LPNT) : Cuts outlook to neutral from positive

Analyst: Cameron Lavey

Based on recent thirs quarter earnings reports and company commentary, we are lowering our fundamental outlook on this sub-industry. We think rising volumes of uninsured patients continues to be the biggest problem facing health care providers. We expect bad debt expense to remain at historical highs in 2006 and possibly trend slightly higher. We see patient volume growth and cost pressure from managed care organizations as additional challenges. Aside from our strong buy rating on rural provider Community Health Systems (CYH), we have hold opinions on other acute operators.

Sysco (SYY) : Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: Anishka Clarke

Including option expense, September quarter earnings per share of 31 cents vs. 35 cents is below our 39 cents estimate. Sales also fell short of our forecasts, but we view as favorable the 4.8% internal growth and 0.4% food cost inflation. We think margins will continue to be hurt by rising fuel, energy and pension costs. But we see some rebound as hurricane effects fade. With full ramp-up of the redistribution center expected by the end of fiscal year 2006 (ending June), we now see benefits in fiscal year 2007 rather than fiscal year 2006. We are lowering our fiscal year 2006 earnings per share estimate to $1.49 from $1.59 and our target price to $34 from $40. Shares yield 1.9%.

ABN Amro (ABN) : Maintains 3 STARS (hold)

Analyst: Rahul Shah

Ahead of ABN's third quarter results, we forecast net attributable profit of €739 million. We believe the American Depositary shares have underperformed recently due to investor skepticism regarding the acquisition of Banca Antonveneta and the extent of an announced restructuring of the Wholesale Client Services division. However, of greater concern is the company's operating inefficiency, in our view. Accounting for currency fluctuations, we are reducing our 2005 earnings per share estimate by 2 cents to $2.31 and 2006's by 8 cents to $2.31. Our 12-month target price remains $26.

Chiron (CHIR) : Maintains 3 STARS (hold)

Analyst: Frank DiLorenzo, CFA

Chiron and Novartis (NVS) agreed, subject to shareholder and regulatory approval, to the acquisition by Novartis of the approximately 58% of Chiron shares it does not already own at a price $45 cash per share. This price has been raised from a previous offer of $40. Strategically, we think the proposed deal makes sense, and we believe that Chiron shareholders are getting very good value for the shares in light of the current valuation and recent operating difficulties of the company. We are raising our 12-month target price for Chiron by $1 to $45 to reflect the bid by Novartis.

Comcast Class A (CMCSA) : Reiterates 3 STARS (hold)

Analyst: Tuna Amobi, CPA and CFA

Comcast agreed to pay $775 million for the cable assets of the privately held Susquehanna Media, which has 225,000 basic subscribers. The deal is relatively small, but we think Susquehanna offers highly contiguous systems, located mainly in Pennsylvania, New York, Maine, and Mississippi. We believe that consideration of about $3,400+ per subscriber seems consistent with recent private deals. Comcast already owns a 30% minority stake in Susquehanna's systems, and we viewed the company as the frontrunner in this auction. The deal is expected to close in the first half of 2006, pending necessary approvals.


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