Amalgamated Financial Corp.

AMAL Details

Amalgamated Financial Corp. (NASDAQ: AMAL) is a commercial bank and a chartered trust company based in New York. The company operates six branches, out of which three are in New York City, and one each in Washington D.C., San Francisco, and Boston. It offers a complete suite of commercial and retail banking products, investment management services, and trust and custodial services to consumers and businesses. This includes Commercial Real Estate loans (CRE), Residential Mortgage Loans, Multifamily Mortgages, and Commercial and Industrial Loans (C&I).

Management Changes: On May 26, 2021, AMAL announced the appointment of Jason Darby as its Vice President (VP), CFO, and Senior Executive VP with immediate effect. Before this appointment, Mr. Darby served as the interim CFO since April 24, 2021, and has been associated with AMAL since July 2015. This news follows the May 11, 2021 appointment of Ms. Priscilla Sims Brown as CEO, effective June 01, 2021. Ms. Brown has an experience of more than 30 years in the financial services industry.

AMAL Financial Trends (Source: Q2FY21 Earnings Presentation)

Q2FY21 Results: The company reported a 7.85% decline in total interest and dividend income to USD 43.42 million in Q2FY21 (ended June 30, 2021) compared to USD 47.12 million in Q2FY20. Interest on loans contributed 69.45% to the total interest and dividend income in Q2FY21. Net income grew 0.33% YoY to USD 10.41 million in Q1FY21 vs. USD 10.37 million in Q2FY20. As of June 30, 2021, the company recorded a 3.32% sequential growth in total deposits to USD 5,909.99 million from USD 5,720.01 million as of March 31, 2021. Net Interest Margin fell 10 bps YoY to 2.75% for Q2FY21. Non-Performing Loans (NPAs) decreased 14.08% QoQ to USD 70.98 million as of June 30, 2021.

Key Risks: In FY20, ~10% of the AMAL clients accounted for 68% of its assets under management. The loss of any of these key clients could adversely impact its revenue from investment management fees. As of December 31, 2020, 92.0% of the collateral properties securing the company’s CRE, multifamily, and construction loans were located in New York City, Washington D.C., and San Francisco, making it vulnerable to geographical concentration risk. A slowdown or disruption of business activity in any of these areas can adversely impact AMAL’s financial position.

Outlook: For FY21, AMAL forecasts its core pre-tax earnings to range between USD 66 - 72 million, excluding any impact of solar tax equity income/loss, non-core items, and changes in Federal interest rate targets. It expects to generate net interest income in the range of USD 168 - 174 million.

Valuation Methodology: Price/Book Value 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.

AMAL Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: AMAL’s stock price has decreased 5.79% in the past three months and is currently at the mid-point of its 52-week range of USD 10.20 to USD 20.22. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is 47.38. We have valued the stock using the Price/Book Value-based relative valuation methodology and arrived at a target price of USD 18.59. Considering the slight correction in the stock price in the past three months, solid track record and management changes, and associated risks, we recommend a “Speculative Buy” rating on the stock at the current price of USD 15.45, down 0.71% as of July 29, 2021, at 1:05 PM ET.

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

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Five Star Senior Living Inc.

FVE Details

Five Star Senior Living Inc. (NASDAQ: FVE) is a senior living and rehabilitation and wellness services company. Its reportable segments are 1) Senior Living, which includes independent living communities (ILs), assisted living communities (ALs), Continued Care Retirement Communities (CCRCs), and skilled nursing facilities (SNFs), and 2) Rehabilitation and Wellness (R&W) services, including physical, occupational, inpatient and outpatient clinics as well as fitness services. As of March 31, 2021, it operated 252 senior living communities across 31 states with 29,265 living units, and 37 inpatient and 215 outpatient R&W clinics owned by Diversified Healthcare Trust (DHC) in 28 states. As of July 29, 2021, the company’s market capitalization stood at USD 179.92 million.

Revenue Mix (Source: Investor Presentation, May 2021)

Strategic Repositioning Plan: On April 09, 2021, the company announced a new strategic plan to reposition its Senior Living management business by focusing on larger IL, AL senior living communities and stand-alone active adult communities. As per the plan, the company will change its management arrangements with DHC to transfer 108 senior living communities with approximately 7,500 living units to new operators. The plan also entails the closure of 27 skilled nursing units in the CCRCs and 37 Ageility inpatient rehabilitation clinics. The strategic move is estimated to be completed by the end of 2021.

Senior Living Portfolio Transition (Source: Investor Presentation, May 2021)

Q1FY21 Results: The company reported a 15.09% decline in total management and operating revenues to USD 50.46 million in Q1FY21 (ended March 31, 2021) compared to USD 59.43 million in Q1FY20. However, the company reported a surge in net income to USD 3.32 million in Q1FY21 compared to a net loss of USD 17.21 million in Q1FY20, attributable to other operating income of USD 7.79 million as the Coronavirus Aid under the CARES Act provided by the U.S. Department of Health and Human Services.

Key Risks: FVE derives a significant portion of its revenue as reimbursement from government programs and third-party payers. In FY20, third-party payers for certain rehabilitation and wellness services accounted for 50.6% of its total revenues. Hence, a reduction in reimbursement from these third-party payers could hurt the company’s financials. In addition, many of FVE’s senior living communities are concentrated in Florida, North and South Carolina, Georgia, Texas, and Indiana. Overdependence on certain geographies could adversely affect the company’s financial health in the future. Furthermore, FVE is heavily dependent on its relationship with DHC, which owns 228 of the 252 senior living communities that FVE operates.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

 FVE Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: FVE’s share price has declined by 19.21% in the past 6 months and is currently leaning towards the lower band of the 52-week range of USD 4.22 to USD 9.25. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 51.56. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 6.64. Considering the correction in the stock price in the past 6 months, strategic repositioning plan, decent financials, and associated risks, we recommend a "Speculative Buy” rating on the stock at the closing price of USD 5.72, down 0.70% as of July 29, 2021.

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

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.