Sea Containers: A Buy
Last year was rough sailing for Sea Containers (SCR.A ), a Bermuda outfit that runs ferry, train, and hotel services and leases out marine cargo containers. Behind the turbulence: September 11 scuttled business at its 63% owned Orient-Express Hotels unit, which normally kicks in 35% of operating income. Container-leasing also lost some steam. The company had planned to sell a part of its hotel stake--and spin off the rest to its own stockholders. Terrorism scotched that plan, as shares of Sea Containers and Orient-Express dived. But since late September, they have snapped back. Sea Containers says it intends to carry out the sale and spin-off this year as part of a plan to cut its $1.6 billion debt.
Also in the cards: Sea Containers may sell to GE Capital its 50% stake in GE SeaCo., which runs the container-leasing operations, say some investors. The joint venture is due to expire in 2003, unless the two companies extend or renegotiate. Sea Containers won't comment on the venture's fate.
Sea Containers is a value play, say some pros--based on the company's assets and its book value of $28 a share. They figure its stake in Orient-Express, now trading at 20 a share, is worth the current price of Sea Containers' shares, which has leaped from 7 last Sept. 21 to 17.39 on Apr. 3. So an investor is paying nothing for its cargo containers and its ferry and train services.
Sea Containers had 2001 revenues of $1.3 billion and profits of 24 cents a share, and it's expected to earn $1.20 in 2002 and $2.20 in 2003, according to Value Line's Craig Sirois. The stock "should reward patient investors," he says.
By Gene G. Marcial