Inside Wall Street
AT LAST, THE BIG STORE IS HITTING IT BIG WITH INVESTORS
The nation's largest retailer is finally starting to get some respect on the Street. Until recently, Sears Roebuck had been a favorite whipping boy of analysts who saw the company as an also-ran. But now, major value players are buying in. The stock, which traded at 30 in March, has been on the rise, closing at a new annual high of 43 1/4 on Aug. 13.
What's the scoop? Two things: The earnings outlook for the restructured company has turned rosy, prompting some analysts to raise their 1991 earnings estimate. Second, whispers are that a wealthy Asian group has been buying shares with the intention of becoming an influential stakeholder. Says one New York money manager: "My information is that an Asian multibillionaire is behind the group, and the pattern of the stock's recent moves has made me heed the story." This pro declined to reveal the name of the interested mega-investor.
Mark Boyer, whose Boyer Asset Management invests in undervalued asset-rich companies, says Sears has "one of the greatest price-to-intrinsic-value disparities of any large, publicly traded company--certainly of any of the Standard & Poor's 500 stocks." He points out that Sears, with revenues of $56 billion, ranks as one of the largest corporations in the U. S., with market leadership in most of its businesses. He argues that at its current price, Sears "represents a significant buying opportunity." He puts the company's asset value at nearly $75 a share.
TURNAROUND TRACK? Here's how Boyer arrives at that price (after adjusting for debt): He values the real estate properties at $7.3 billion; Allstate Insurance, the nation's second-largest property-liability insurer, at $7 billion; Sears Merchandising Group, which includes 410 full-line stores and 902 specialty stores, at $5.3 billion; Discover Card Services, the credit-card folks, at $3 billion; Dean Witter Financial Services Group, which offers securities brokerage, investment banking, and other financial transactions, at $1.5 billion; and the Coldwell Banker Real Estate Group, combined with Homart Development, which operates shopping centers and office and commercial properties, at $1.5 billion. Total value: $25.6 billion, or $74.61 a share.
After taking some severe cost-cutting steps and introducing specialty-retailing formats, says Boyer, "Sears appears to be on track toward a turnaround." Indeed, the company posted better-than-expected results in the second quarter.
Boyer believes that part of management's agenda is to spin off its real estate and financial-services units "as a way of maximizing shareholder value." Sears declined comment.GENE G. MARCIAL