Analysts approve of Brink’s spin

Tuesday, April 1, 2008

LOS ANGELES - Everyone knows what the activist hedge funds have been saying about a spin-off of Brink’s Home Security, but what do the industry investment gurus have to say about it?
Imperial Capital Asset Management—which recently purchased USBX Advisory, the firm founded by John Mack—weighed in on the Brink’s spin-off question in a Feb. 26 report.
In that report, it reiterated its BUY rating for The Brink’s Company stock.“We believe this announcement represents a major stock catalyst and we see potential upside beyond our current price target ($87) toward the $100 range, assuming BHS trades at 12x TTM EBITDA, in-line with sector peer Securitas Direct.”
The report says that Brink’s Home Security’s valuation was restrained by The Brink’s Company’s conglomerate structure, although for practical purposes BHS and the armored trucking business were already operating as separate companies “with minimal business and managerial overlap … In our view, the expected benefits of the planned spin-off far outweigh the operational and financial considerations as independent public companies.”
Further, BHS’s “solid operating performance, robust brand value, consistent subscriber growth and one of the lowest attrition rates in the industry” means BHS “could earn a premium multiple.” Imperial also notes that two major alarm companies, HSM and Securitas Direct, have been valued by acquirers at 12x TTM EBITDA over the past year. SSN