Broadmark Realty Capital Inc.

BRMK Details

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (REIT) that offers short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation, and development of residential and commercial properties. As of June 30, 2021, BRMK has 199 active loans, with total commitments of USD 1.3 billion and a principle outstanding of USD 880.2 million across 137 borrowers in 14 states and Washington, DC.

Latest News:

• Dividend Declaration: On October 14, 2021, the company declared a monthly cash dividend of USD 0.07 per common stock. The dividend will be paid on November 15, 2021, to stockholders of record on October 29, 2021.
• Change in Management: On September 20, 2021, BRMK announced that its current Chief Executive Officer (CEO) and President Jeffrey Pyatt would take over the position of Chairman of the Board upon the retirement of its current Chairman Joseph Schocken, effective November 14, 2021. The company further stated that it has begun a hunt for a President to strengthen the executive team's strength in the future.

Q2FY21 Results:

• Stable Revenue: The company reported a slight 0.39% growth in total revenue to USD 29.18 million in Q2FY21 (ended June 30, 2021) compared to USD 29.07 million in Q2FY20.
• Net Income Growth: Q2FY21 net income increased to USD 18.25 million from USD 15.84 million in Q2FY20, primarily due to a decrease in the provision for credit losses.
• Strong Balance Sheet: As of June 30, 2021, the company had cash & cash equivalents of USD 164.02 million and no outstanding debt.
• Loan Originations & Repayments: Total loan originations and repayments during the quarter were USD 197.4 million and USD 111.2 million, respectively.

Key Risks:

• Geographic Concentration: The company's active loans portfolio is entirely concentrated in 12 states plus Washington, DC, with Washington and Colorado accounting for 24.3% and 22.4%, respectively, of the total loan portfolio as of FY20 end. Any decrease in the value of these places' real estate, increase in unemployment, or any significant disasters could diminish 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 increased 1.23% in the past twelve months and is currently close to the mid-band of its 52-week range of USD 9.74 to USD 11.10. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 50.19. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 9.71.

Considering the very slight movement in the stock price in the past twelve months, largely stable top and bottom-line, and current valuation, we believe the decent fundamentals are adequately reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 10.26, down 1.39% as of November 02, 2021, 11:44 AM ET.

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

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