July 2, 2008

Spin-off valueidea: Lender Processing Services

Lender Processing Services, Inc. Celebrates its Spin-Off with Ringing of the Opening Bell(SM) at the NYSE: Financial News - Yahoo! Finance

This was one of the company on my watch list for a spin-off. The company provides technology platform and work flow tools for the mortgage industry. It has a large market share of the market.

I thought the stock would get dumped by investors, which can be a good value for several reasons:

1. It is in the wrong industry so it must be guilty by association, although its business model nicely isolate it form mortgages ups and downs as it service defaults as well as origination.

2. Its parent company is a member of the S&P 500, it will not be so institutional will dumb the stock.

The stock came out today with 9% upward move, but still I think there can be more upside for the company. My back of the envelop calculation on the company is that it trades at 11 or low teen PE multiples. Its discounted free cash flow on a perceptual basis with no growth indicate that it is undervalued a bit from its trading price.

I will be doing more research and analysis on its business and if its price comes down due to institutional duping then all the better.

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