Sterne Agee Raises Estimates & PT On TAL International

Strong container leasing fundamentals show no signs of slowing down as evidenced by TAL International's TAL strong 3Q and improving outlook. Demand for new containers is accelerating; utilization rates remain at almost “fully utilized” levels, boosting realized revenue and reducing container storage and handling expenses, and pricing on new containers and expiring leases will boost average per diem rates. Aware of current high container lease rates, shipping lines are holding on to older containers to avoid having to re-lease containers at higher lease rates. Sterne Agee believes this will increase TAL's per diem rates in 2011, as bill-down periods come to an end, and customers are forced to re-lease boxes at higher rates. Sterne Agee is raising estimates for 4Q, 2011, and 2012 on higher capital deployment, better pricing on new leases and lease renewals, higher utilization, and lower interest expense. Sterne Agee has a Buy rating with a $36 PT on TAL TAL closed Monday at $27.90