What's Merrill Lynch Worth?

Do the math and Merrill Lynch and Company Inc.(MER) is worth $40 per share, which is well above its current market value, says Citigroup Global Markets analyst Prashant A. Bhatia. 

In a brief note to clients, Mr. Bhatia said:

We estimate that Merrill's BlackRock stake is worth $9 per share, its wealth management franchise is worth $16 per share, and the tangible equity in its institutional franchise is currently $15 per share (assuming $24b of the firm's $30b in tangible common equity is allocated to this division), totaling $40 per share in value.

He added that Merrill has ample funding sources, with over $90-billion in liquidity and a $100-billion customer deposit franchise.

The analyst reiterated his "buy" rating and left his $45 price target unchanged. 

Comments

[bsharvy]

It's insanely leveraged: assets/equity = 60. The worst of the major players, by far, as of the summer. That's from the June version of the balance sheet, so maybe they've delevered since then.

2008 Sep 14 06:26 AM

[Ishortyou]

so they said about Lehman ....

2008 Sep 14 07:28 AM

[venividivici]

Would any vaguely sensible person trust the word of an anal yst from Citigroup. How many many times have these people got it hoplessly wrong? In other profession they'd be sacked for being grossly incompetent. In this game, it's all about propping each other up with BS.Their financial situations are a black box. What we do know is that most of the ways they made bags of money in the past are now gone or have greatly diminished. And they have had to borrow a lot of expensive money to recapitalise. Most of these companies are dead meat. End of story.

2008 Sep 14 11:40 AM

[kmca1989]

MER is #1 in the world in the financial advisor business, which will only grow as babyboomers need someone to handle their retirement.

it's not a trading house like LEH, BCS, etc, and they've set the standard for CDO writedowns @ .22 on the dollar. Not to mention John Thain, the new CEO, is a goldman man and wouldn't have jumped onto the titanic.

2008 Sep 14 12:49 PM

[junkman]

Wasn't Citi the firm that put out a buy rating on the homebuilders last September declaring them a good value?

I heard the same story from analysts about LEH, WM, etc

The analyst doesn't discuss anything about $800B plus of assets/liabilities on the books? Have write offs been taken on all of their known losses? how about their alt a exposure? commercial RE loans? How about all of those level 3 liabilities? what's their capital to leverage ratio on those level 3 assets? Why such a large short interest in the stock? why are they so highly leveraged ?

The analyst has done a half a** analysis ( at best) so i would not put much in his recommendation

2008 Sep 14 08:16 PM