Bank of Marin Bancorp

BMRC Details

Bank of Marin Bancorp (NASDAQ: BMRC) is a bank holding company that runs the Bank of Marin, a state-chartered commercial bank in California. Professionals, small and middle-market enterprises, and individuals can take advantage of commercial and retail deposit and loan programs, personal and business checking and savings accounts, and asset management and trust services offered by the BMRC. As of October 19, 2021, the company's market capitalization stood at USD 622.58 million.

Latest News:

• Transition in Management: Russell A. Colombo, Chief Executive Officer of Bank of Marin and Bank of Marin Bancorp, announced his resignation on September 24, 2021, with an effective date of October 31, 2021. Tim Myers, 51, the current President and Chief Operating Officer (CEO), has been selected as his successor by the Board of Directors of BMRC, the parent corporation of Bank of Marin. Accordingly, on November 1, 2021, Tim Myers will take over as CEO.
• Successful Acquisition of AMRB: BMRC stated on August 9, 2021, that it had completed its acquisition of American River Bankshares (AMRB), the parent company of American River Bank, for USD 125 million in an all-cash transaction, effective August 06, 2021.

H1FY21 Results:

• Slight Decline in Total Interest Income: BMRC reported a slight decline of 3.10% in total interest income to USD 48.82 million in H1FY21 (ended June 30, 2021) from USD 50.38 million in H1FY20, owing to a decline in interest income and fees on loans, investment securities, and federal funds.
• Increase in Bottomline: However, the company has witnessed a slight increase in net income to USD 18.23 million during H1FY21 vs. USD 14.63 million reported in H1FY20.
• Growth in Deposits: As of June 30, 2020, the company's total deposit stood at USD 2.68 billion compared to USD 2.50 billion as of December 31, 2020.

Key Risks:  

• Geographic Concentration Risk: 77% of BMRC's loans were secured by real estate as of December 31, 2020, predominantly in California. However, economic factors such as a decline in employment rates and interest rates can cause real estate valuations to change dramatically in a short period, affecting the company's financial strength.
• Product Concentration Risk: Furthermore, the company's business approach is geared toward small and medium-sized enterprises, which tend to have lower market shares, have more volatile operating results, and are more sensitive to economic downturns. As a result, economic variables impacting real estate and these small to medium-sized enterprises may wreak havoc on BMRC's finances.

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY22E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

BMRC Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

BMRC stock has surged 19.20% in the past twelve months and is currently leaning towards the upper-band of the 52-week range of USD 29.43 to USD 42.19. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 57.72. We have valued the stock using the Price/Book Value-based relative valuation methodology and arrived at a target price of USD 40.14.

Considering the increase in the stock price in the past twelve months, recent acquisition activity, decent financials, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 37.81, up 0.75% as of October 19, 2021.

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

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

Intelligent Systems Corporation

INS Details

Intelligent Systems Corporation (NYSE: INS) provides credit technology solutions and processing services to the FinTech industry through licensing and financial transaction management software. Its activities in Romania, India, and the UAE are managed by its wholly-owned subsidiary CoreCard Software, Inc. As of October 19, 2021, its market capitalization stood at USD 363.87 million.

Latest News:

• Establishing Partnership to add Value: Vervent, a leading Lending as a Service (LaaS) business, announced its collaboration with CoreCard, a subsidiary of INS, on July 08, 2021, to extend its payment processing capabilities. This collaboration will bring a new payment platform with cutting-edge technology to Vervent's inventory, allowing for greater flexibility and a faster launch of client card programs.
• Share Repurchase Program: The company authorized an additional USD 10 million for its share repurchase program in April 2021, of which USD 4.4 million has been used. During H1FY21, INS repurchased USD 7.8 million in shares. It still has USD 5.6 million in authorized share repurchases as of June 30, 2021.

H1FY21 Results:

• Growth in Revenue: Revenues increased 39.64% to USD 22.27 million in H1FY21 (ended June 30, 2021) from USD 15.95 million in H1FY20, owing to an increase in the number of clients and accounts on file, as well as an increase in the number and value of professional services contracts executed.
• Boost in Bottomline: The Company has witnessed an increase in net income to USD 3.85 million during H1FY21 vs. USD 3.25 million reported in H1FY20.
• Healthy Balance Sheet: As of June 30, 2020, the company's cash and cash equivalents stood at USD 26.21 million with no outstanding debt.

Key Risks: Goldman Sachs Group, Inc., the company's primary customer, accounted for 71% and 65% of consolidated sales in H1FY21 and H1FY20, respectively. Excessive reliance on a single customer for revenue might harm the company's financial health in the long run.

Outlook: While the situation remains uncertain, India's COVID-19 trend is improving. Furthermore, INS continue to anticipate licensing revenue in H2FY21. However, the company anticipates that some income will be pushed into FY22 due to regular project delays with significant clients. It further expects to achieve top-line growth of 20-25% for FY21.

Valuation Methodology: EV/Sales 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.

INS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

INS' share price has surged 31.09% in the past three months and is currently leaning towards the mid-band of the 52-week range of USD 30.52 to USD 54.58. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 60.59. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 43.45.

Considering the company's growth prospects, healthy balance sheet, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 41.62, up 1.71% as of October 19, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

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