HOMB has been relatively quiet on the acquisition front since last summer, says Wunderlich's Kevin Reynolds, instead focusing its energies on integrating the purchase of Liberty Bancshares. But with initial results coming in ahead of schedule, HOMB will soon be getting off the sidelines maybe as soon as this quarter and could add $3 per share in incremental value.
"Our analysis assumes that HOMB will acquire the average FL target ($1.75 billion in assets) for 1.6x TBV in a 75% stock/25% cash transaction. Further assuming that HOMB achieves a 1.00% ROAA within two to three years yields incremental EPS between $0.20 and $0.30 per share. Valuing this at an LTM P/E multiple of 15x (vs. 20x LTM EPS for Southern peers) suggests incremental value added of $3/share or more to HOMB shareholders."
He upgrades from Hold to Buy with new price target of $38.