Scott Kuensell, managing director at Brandywine Asset Management, is always on the lookout for beaten-down companies with valuable assets. He thinks he sees one in the now not-so-hot travel business, Sabre Holdings (TSG). Kuensell bought shares in October as they fell from nearly 26 to 20. Why? He believes the assets are worth more than Sabre's stock price, based on recent deals, including Cendant's (CD) buy of Orbitz in 2004.
Spun off in 2000 by AMR, American Airline's (AMR) parent, Sabre has become a major travel provider. Kuensell estimates Sabre's three units are worth 32 a share: He figures its travel network that provides bookings (71% of sales) is worth $17.72 a share; Travelocity, the sole provider of travel services to those who book through America Online's (TWX) and Yahoo!'s (YHOO) sites (18%), $10.50; Sabre Airline Solutions, a software provider to airlines and travel operators (11%), $1.54; plus cash net of debt, $2.27. Scott Barry of Credit Suisse First Boston (CSR) (which did business with Sabre) forecasts earnings of $1.48 in 2005, up from 2004's $1.38. He rates the stock a "hold."
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial