Value Investor Hunt: Finding Value in Shipping Containers (TAL, TGH, BOX)

If the indications are anywhere close to accurate, TAL International is a value stock that should be worth a look in the transport segment of leasing intermodal containers and chassis.  Keefe Bruyette & Woods raised its rating to Outperform with a $41 target based upon its current pricing and discount.  More importantly, or in more detail, comes an internal research audio-video report from a Thomson Reuters analyst calling TAL International a Stellar Small Cap. 

One comparison is to Textainer Group Holdings Limited (NYSE: TGH) but TAL International has a better dividend after looking at the two as it pays 6% in yield versus not quite 4% at Textainer.  Another relative play is in the much smaller company called SeaCube Container Leasing Ltd. (NYSE: BOX), but even with some more attractive multiples SeaCube slightly lags with a 5.4% dividend yield.

Mike Tarsala sees TAL International as having solid business and pricing power with about 98% of its containers in use.  He calls it a $35 stock with about 29% upside to $45 if it meets earnings targets this year.

After these two calls coincided in TAL, we wanted to see what else was driving the stock (up or down)…

TAL International was just given a #3 Hold rating at Zacks.  Just a week ago came an initiation of TAL International by Wells Fargo with a target range of $42 to $45 per share.  In late-April came word that R.W. Baird cut the rating to Neutral with a $40 target.  In the last few days the company also closed on a $235 million note offering, which was rated as “A” by credit rating.  It also got its earnings out of the way at the end of April.

At $32.95 its 52-week trading range is $20.43 to $38.45 and its market cap is about $1.05 billion.  TAL International has consensus Thomson Reuters estimates of $3.41 EPS for 2011 and $3.70 EPS in 2012 and that gives forward earnings multiples of 10-times expected 2011 earnings and 9-times expected 2012 earnings. 

A consensus price target from Thomson Reuters measures the external anaysts out there and that price target objective is $42.67.  If the consensus is right, then the upside for TAL International is almost 30% for investors today.

JON C. OGG