WMB: To Sell Refineries - Asset Sale Part of Plan Goes to $3B High-End
Credit Suisse First Boston - United States Curt Launer June 19, 2002 STRONG BUY Target Price: 22.00 (US$) Williams Companies (WMB) To Sell Refineries: Asset Sale Part Of Plan Goes To $3B High-end
WMB announced late yesterday that it intends to sell its two refineries and related assets as part of its balance sheet "fix" plan. The expected sale price in excess of $1 billion was stated by WMB to be in conjunction with third party expressions of interest in the assets.
We regard this move very favorably. It removes earnings volatility, focuses WMB on core businesses and places WMB's "plan" for asset sales at the high end of the $1.5-$3.0 billion range discussed in late May.
Our estimates are $1.25 per share for '02 and $1.50 for '03 and are unchanged by the prospective refinery sale. Our cash flow estimates are $3.30 for '02 and $3.75 for '03. Our adjusted book value estimate of $18.00 per share places no value on WMB's Merchant unit.
Our recovery thesis for WMB to "utility multiples" as its plan is executed is for a recovery to $15 per share. Our longer-term target of $22 returns WMB to historic pipeline multiples of 15x eps and 6x cash flow. We rate WMB Strong Buy.
I wouldn't hold a candlestick to it, but I'd say they might be able to drum up a 10-11.5 final exit point for slower but not brain dead bagholders and a nice trade, couple a trades..., for the nimble. jmho. fwiw.