Markets & Finance

S&P Boosts Trizec, Barclays


From Standard & Poor's Equity Research

Trizec Properties (TRZ): Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Royal Shepard

Trizec Properties agrees to be acquired by a joint venture of Brookfield Properties (BPO) and The Blackstone Group for $29.01 per share in cash. Brookfield Properties will also acquire 100% of the shares of Trizec Canada, whose principal asset is a 38.5% stake in Trizec Properties. The purchase price is an 18% premium over Friday's closing price and well above our 12-month target price of $19. Subject to shareholder approvals, we see completion likely, given Trizec Properties's controlling stake in Trizec Properties. We are raising our target price to $29 and our recommendation to hold.

Brookfield Properties (BPO) : Maintains 4 STARS (buy)

Analyst: Royal Shepard

Brookfield Properties and The Blackstone Group agree to acquire Trizec Properties (TRZ), an office REIT with 61 properties, for $29.01 cash per share, via a newly formed joint venture. Trizec Canada, a related entity that owns about a 38.5% interest in Trizec Properties, will also be acquired, at $30.97 a share. Brookfield Properties expects to contribute $450 million in equity, for about a 34% stake, to the venture. The deal, still subject to Trizec shareholder approvals, is expected to close by year end. Pending release of further financial details, we maintain our 12-month target price at $36 for Brookfield Properties.

Barclays (BCS): Raise to 3 STARS (hold) from 2 STARS (sell)

Analyst: Derek Chambers

We forecast revenue growth of about 22% in 2006 and a net profit of around $7.43 billion, with $537 million coming from the disposal of First Caribbean Associate, a banking affiliate. We are increasing our earnings per American Depositary Share estimate for 2006 to $4.58 from $4.20 and setting 2007's at $4.70. Our 12-month target price increases by $4 to $48.

Note: An earlier version of this story incorrectly said S&P cut its recommendation on Barclays. We apologize for this error.

CA (CA) : Cuts to 2 STARS (sell) from 3 STARS (hold)

Analyst: Zaineb Bokhari

CA realigns sales organization under COO Michael Christenson and announces the departure of Gregory Corgan, EVP of worldwide sales since 2004. Given many recent high-level executive departures, and what we see as CA's poor execution, weak results and modest underlying growth, we think it will be some time before the company can show improvement. Despite recent the sell-off in CA shares, we see added price-to-earnings compression as likely. Our fiscal year 2006 (ending March) and fiscal year 2007 estimates remain 80 cents and 97 cents, but our 12-month target price falls $4 to $20.

Sepracor (SEPR): Maintains 3 STARS (hold)

Analyst: Herman Saftlas

Sepracor, as with other companies, recently received a Securities and Exchange Commission letter of inquiry related to stock options, which we believe relates to possible backdating of grants. We think options represent a key part of executive compensation at Sepracor, and estimate 2006 options expense at about 40 cents a share. Sepracor says it will cooperate with the SEC, and has set up a special board committee to oversee grants. We see strong earnings per share (EPS) growth for Sepracor, driven by Lunesta and Xopenex, plus new drugs, and reiterate our target price of $55, a modest premium-to-peers 20 times our 2007 estimate of $2.75.

Adobe Systems (ADBE) : Correction - Reiterates 4 STARS (buy)(Prior Marketscope story said opinion was Hold.)

Analyst: Scott Kessler

A recent unconfirmed report from the Wall Street Journal indicates Microsoft (MSFT) will not include PDF technology in Office 2007. Adobe wanted to charge a fee for use of the technology. Although this will perhaps detract somewhat from the future deployment and usage of PDF, we think it will enable Adobe to better control and monetize this important technology. Adobe has scheduled a May quarter conference call for June 15, and we believe mixed results and guidance are already largely priced into shares, reflecting a product-cycle transition.


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