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May. 13 2007, 12:44 PM ET
Nearest price: 17.10 (05/14/07) |
by timatayo (profile)
(all of timatayo's ratings) |
rating:
Hold |
(Previous rating: Hold,
on May. 10 2007, 10:14 PM ET)
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May. 10 2007, 3:40 PM ET
Nearest price: 17.40 (05/10/07) |
by martinroad (profile)
(all of martinroad's ratings) |
rating:
Sell |
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WAUW is trading at $17.50 which is 85% of fully converted book if one assumes a second step offering at 105% of fully converted book.
Although WAUW has $1.6 billion in assets (of which $1.3 billion are loans), if it fully converted, they would have about 32.5% tangible equity/assets.
It is my view that although WAUW has management that will utilize the MHC structure correctly and will second step at some point, the stock has gotten ahead of itself and should be trading lower. Not many people understand the fundamentals of the company. Here are a few that I will point out.
Good:
1) CEO is investor friendly
2) Branch network is above average
Bad:
1) NIM is in a horrible trend 2.27% in 1Q07
2) Yield on loans is poor at 6.25% on average
3) Cost of interest bearing liabilities is high at 4.35% (and moving higher)
4) Loans/Deposits high at 135%
5) Major components of Loan Portfolio: 48% 1-4 family; 35% multifamily; 12% Construction
6) Deposit base is not good with 84% of deposits being CDs
7) Asset quality trend is horrible, with Non Performing loans increasing to $42.1 million at 3/31/07 as compared to $28.8 at 12/31/06, $21.8 million at 9/30/06, $15.5 million at 6/30/06.
8) Non performing assets/total assets are 2.6%, up from 1.79% at 12/31/06, 1.33% at 9/30/06, and 0.98% at 6/30/06.
9) Reserves/Loans 0.52%
10) If WAUW did a second step today, they would have over 32% capital, and they don't have the deposits to fund additional asset growth, so they would have to use wholesale funding.
It is my view that WAUW will be worth more than $17.50 at some point, but in between now and then, I think it will trade down to $15 or lower, the company will buyback stock down there -- which will be accretive to eventual fully converted book. WAUW is going to be a very long term investment (like TFSL). It should be trading at 70%-75% of fully converted book ($14.41-$15.44).
There is a fairly aggressive buyer at around $17.50, so you can sell or short a fair amount at that level.
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