Broadmark Realty Capital Inc.

BRMK Details

Broadmark Realty Capital Inc. (NYSE: BRMK) operates as an internally managed real estate investment trust (REIT) specializing in underwriting and servicing short-term first deed of trust loans for real estate investors and developers. As of June 30, 2021, BRMK has 199 active loans, with ~USD 1.3 billion in total commitments and USD 880.2 million in principle outstanding across 137 borrowers in 14 states and Washington, D.C. BRMK's loans typically range from USD 0.20 million to USD 40 million in total commitments at origination, carry a fixed annual rate of 10% to 13%, and have an initial term of 5 to 18 months, depending on the size of the real estate project and the completion horizon. As of October 14, 2021, the company's market capitalization stood at USD 1.32 billion.

Quarterly Dividend: On October 14, 2021, the company declared a quarterly dividend of USD 0.07 per common share, payable on November 15, 2021, to shareholders of record on October 29, 2021.

Leadership Change: On September 20, 2021, BRMK announced that effective November 14, 2021, its current Chief Executive Officer (CEO) and President Jeffrey Pyatt would assume the responsibilities of Chairman of the Board, while the current Chairman of the Board, Joseph Schocken, announced his retirement. Additionally, the company has begun searching for a President to add to the executive team's depth for the future.

Q2FY21 Results: The company reported YoY growth of 0.39% in total revenue to USD 29.18 million in Q2FY21 (ended June 30, 2021) compared to USD 29.07 million in Q2FY20. Interest Income, which accounted for 74.08% of the total revenue in Q2FY21, declined by 2.53%. However, net income for Q2FY21 increased to USD 18.25 million from USD 15.84 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 164.02 million and no outstanding debt.

Key Risks: The company's credit portfolio is concentrated in 12 US States, with Washington and Colorado accounting for 24.3% and 22.4%, respectively, of the total loan portfolio as of FY20 end. As a result, any downturn in the property value in these areas, rise in unemployment, or any catastrophic events in these states could reduce the collateral value and the amount of money borrowers have available to repay their loans.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

BRMK Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: BRMK's share price has decreased 3.09% in the past three months and is currently close to the mid-band of its 52-week range of USD 9.67 to USD 11.10. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 45.32. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 12.06. Considering the slight correction in the stock price, growth in bottom-line, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 10.05, up 0.70% as of October 14, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.