Credit Suisse is out downgrading American International Group (NYSE:AIG) to Underperform from Neutral while lowering target to $15 (prev. $30).
Firm notes they are lowering their 2009E to -$13.98 ($2.80 for 2H09) and initiating a 2010E at $5.70.
CSFB's Underperform rating reflects: 1) Near term monetization of value of businesses suggests little to no value for common equity, 2) book value analysis suggests mid-teens stock, 3) distressed tender of hybrids – a book value and recap opportunity, 4) normalized capital structure yields annual EPS of $1.50 to $2.50, 5) upside-down capital structure with large debt load vs. common equity, 6) ample liquidity, but near term debt maturities may increase reliance on fed line, and 7) use of government funds.
New CEO Benmosche a positive, but low probability of meaningful common equity value: The recent rally of some of the more distressed financial stocks, the arrival of new CEO Bob Benmosche, and the potential prospect of slowing the disposition of some of AIG’s businesses have all contributed to the recent large move in the AIG stock price. But the firm doesn't expect that a 2- to 3-year process will render upside value for common equity holders, and they note the risk of further erosion of franchise value and the intention of the government to be a bridge rather than a permanent stakeholder suggests meaningful asset sales/IPOs need to occur over the coming 12-18 months.
Firm's $15 target price is derived from a ~1x estimated tangible book value ex. AOCI and 7x to 8x their estimate of EPS with a normalized capital structure.
Notablecalls: Another blow to AIG. The tape is strong this morning offering the early birds an oppy to short AIG above Friday's closing price.
CSFB brings little new to the table but it looks like they were at least partially right on the stock with their $30 tgt. Now this gets lowered to $15.
Firm notes they are lowering their 2009E to -$13.98 ($2.80 for 2H09) and initiating a 2010E at $5.70.
CSFB's Underperform rating reflects: 1) Near term monetization of value of businesses suggests little to no value for common equity, 2) book value analysis suggests mid-teens stock, 3) distressed tender of hybrids – a book value and recap opportunity, 4) normalized capital structure yields annual EPS of $1.50 to $2.50, 5) upside-down capital structure with large debt load vs. common equity, 6) ample liquidity, but near term debt maturities may increase reliance on fed line, and 7) use of government funds.
New CEO Benmosche a positive, but low probability of meaningful common equity value: The recent rally of some of the more distressed financial stocks, the arrival of new CEO Bob Benmosche, and the potential prospect of slowing the disposition of some of AIG’s businesses have all contributed to the recent large move in the AIG stock price. But the firm doesn't expect that a 2- to 3-year process will render upside value for common equity holders, and they note the risk of further erosion of franchise value and the intention of the government to be a bridge rather than a permanent stakeholder suggests meaningful asset sales/IPOs need to occur over the coming 12-18 months.
Firm's $15 target price is derived from a ~1x estimated tangible book value ex. AOCI and 7x to 8x their estimate of EPS with a normalized capital structure.Notablecalls: Another blow to AIG. The tape is strong this morning offering the early birds an oppy to short AIG above Friday's closing price.
CSFB brings little new to the table but it looks like they were at least partially right on the stock with their $30 tgt. Now this gets lowered to $15.
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