Ellington Financial: The Best Mortgage 'REIT' At A Healthy Discount To Book Value
Thomas Lott • 43 Comments
Thomas Lott • 43 Comments
Mon, Jul. 11, 7:13 AM
- June 30 book value per share of $20.30 edged lower by $0.03 from one month earlier. It stands against BVPS of $20.63 at the end of Q1. Adding back the $0.50 dividend, the company was able to post a modest positive return for Q2 vs. a rough Q1.
- Friday's EFC close of $16.85 is a 17% discount to June 30 book value.
Wed, Jun. 8, 7:19 AM
- Book value per share of $20.33 as of May 31 fell from $20.73 one month earlier, but the company went ex-dividend on May 27. Adding back that $0.50 payout, book value for EFC gained a dime for the month, not quite enough to cover the monthly run rate of dividends.
- Last night's close of $17.24 is a 15% discount to book.
- Source: Press Release
Sat, May 7, 8:46 AM
- Book value per share at April's end is estimated to be $20.73 vs. the $20.63 just reported for the end of March. It wouldn't be enough to cover the run rate of the $0.50 quarterly dividend, but after the company lost 5% of book value in Q1, April's looking like a victory.
- Yesterday's close of $17.18 is a 17% discount to April 30 book.
- Speaking on the earnings call yesterday (transcript), co-CIO Mark Tecotzky says the "silver lining" of Q1's ugly results is that they weren't caused by fundamental weakness in Ellington's (NYSE:EFC) credit assets, or realized losses. There were violent moves in both rates and credit in Q1, and "relative value relationships did not immediately re-price sufficiently."
- Credit Suisse's Doug Harter says Ellington's calling card over the years was its lower volatility returns compared to the mREIT players. The results in Q1 kind of killed that reputation. Does management plan any changes in the way it runs the portfolio? Tecotzky responds that March was an outlier, but the opportunity that's been created with this move in the market is greater than the negative consequence of a little extra volatility.
Fri, May 6, 3:09 PM
- The company lost $23.2M in Q1 and more than 5% of its book value as it was caught on the wrong side of the major rally in high-yield off the Feb. 11 bottom. While the corporate high-yield in which Ellington (EFC +1.1%) was short surged higher, structured credit markets - of which Ellington was long - failed to participate.
- In the earnings release, CEO Laurence Penn says the company continues to have concentrated short positions in various high-yield corporate credit indices.
- Penn: "With yield spreads on our long portfolio having widened and those on our short portfolio having tightened, our conviction remains as strong as ever in the relative attractiveness of our overall position. We continue to believe that widening credit spreads remain a significant risk, and that the yields that we can realize on our structured credit portfolio will ultimately outpace those on our hedges."
- Earnings call presentation slides
- In other potentially bullish developments, Ellington's portfolio of consumer loans increased by more than 25% in Q1, and portfolio of non-QM mortgages more than doubled.
- Previously: Nasty quarter at Ellington Financial (May 6)
Fri, May 6, 7:22 AM
- Q1 net loss of $23.2M or $0.69 per share vs. income of $1.8M and $0.05 in Q4. Dividend is $0.50.
- Book value per share of $20.63 drops from $21.80. Last night's close was $17.02, a 17.5% discount to book.
- Economic loss for the quarter of $0.67 per share, or 12.3% annualized.
- About 300K shares repurchased during quarter for average price of $17.30 each, boosting BVPS by $0.03.
- CEO Laurence Penn:"The loss was primarily the result of a significant decoupling in the latter half of the quarter between our assets and our credit hedges, which were—and continue to be—concentrated in short positions in various high-yield corporate bond indices. Looking ahead: "We have also been disclosing the adoption of a more defensive position, as we have been anticipating possible stresses in the financial system, particularly in the credit markets."
- Conference call at 11 ET
- Previously: Ellington Financial EPS of -$0.69 (May 6)
- EFC flat premarket
Fri, May 6, 12:11 AM
Wed, May 4, 5:35 PM
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Mon, May 2, 5:08 PM
Thu, Apr. 21, 9:51 AM
- The mortgage REIT sector is lit up red in early action, but Ellington Financial (EFC +0.3%) is eking out a small gain after being initiated with an Outperform rating at FBR Capital. The $20.50 price target represents 20% upside.
- Ellington Financial is a partnership, not a REIT, but its business model is like that of the firms in the mREIT sector.
Thu, Apr. 7, 9:41 PM
- March 31 book value per share of $20.59 slips from $21.24 a month earlier, and $21.80 a quarter ago.
- Today's close for EFC of $17.15 is a 16.7% discount to March 31 book. The discount to book is narrowing, but unfortunately nearly all of that is coming from a decline in book value - off $1.21 per share or 5.5% from last quarter.
- Source: Press Release
- Now read: Ellington Financial Suffers From The Fed's Incompetence
Tue, Mar. 29, 2:56 PM
- A fast series of rate hikes wouldn't be good news for mortgage REITs, whose carry-trade business model breaks down with a flat or, worse, inverted yield curve.
- Any worries about hawkish Fed action were considerably diminished today after Janet Yellen said caution on rate hikes is "especially warranted," and suggested there's more slack in the labor market than what the trim 4.9% headline UE rate would suggest.
- Mostly lower earlier, the mREIT sector (REM +1.2%) has turned sharply higher.
- Annaly Capital (NLY +0.35), American Capital (AGNC +0.4%), Armour (ARR +1.2%), CYS Investments (CYS +2.3%), New York Mortgage (NYMT +3.2%), MFA Financial (MFA +1.4%), Western Asset (WMC +2.7%), Anworth (ANH +1.5%), Dynex (DX +2.1%), AG Mortgage (MITT +1.9%), Ellington Financial (EFC +1.2%).
Wed, Mar. 16, 2:32 PM
- Losing some ground of late on concern about a faster-than-expected series of rate hikes, the mortgage REITS (REM +1.1%) are catching a bid after the Fed cut its 2016 rate hike forecast to just two moves from four.
- Armour (ARR +1.5%), Annaly (NLY +0.9%), Chimera (CIM +1.6%), Invesco (IVR +1.7%), New York Mortgage (NYMT +1.4%), Hatteras (HTS +1%), Capstead (CMO +1.1%), Western Asset (WMC +1.5%), AG Mortgage (MITT +1.2%), Ellington (EFC +1.6%)
- ETFs: MORL, REM, MORT, LMBS
- Previously: Financials suffer as Fed cuts rate hike forecast (March 16)
- Previously: Fed stays on hold, sees just two rate hikes this year (March 16)
Mon, Mar. 7, 6:36 PM| Mon, Mar. 7, 6:36 PM
Fri, Feb. 26, 10:07 AM
- The mREITs (REM +1.3%) are higher across the board after Apollo Residential Mortgage (AMTG +31.3%) agrees to a sale at a hefty premium to last night's close, but still at a discount to book value.
- The entire sector is trading at sizable discounts to book value, with some names at massive discounts. For its part, Apollo Residential yesterday could be purchased for about 60% of its end-of-year book value. And the assets on the books of these companies tend to be highly liquid and easily valued.
- Running an mREIT may not be a terribly efficient exercise at the small market caps most of the sector sports. The companies depend on being able to issue stock with which to fund growth, but can't do so (without being wildly dilutive) when the shares are trading at such wide discounts.
- Sector giants Annaly Capital (NLY +0.6%) and American Capital Agency (AGNC +1.2%) have market caps above $6B, and Two Harbors (TWO +0.8%), Chimera (CIM +1.1%), CYS Investments (CYS +1%), Invesco (IVR +3.5%), Hatteras (HTS +1.2%), MFA Financial (MFA +1%), and Capstead (CMO +1%) are all near or well over $1B.
- Players in Apollo's league (sub-$500M market cap) include New York Mortgage (NYMT +1%), Western Asset (WMC +0.6%), Anworth (ANH +1.3%), Dynex (DX +1.4%), Arlington Asset (AI +4.6%), AG Mortgage (MITT +8.7%), The Ellingtons (EFC +1.9%), (EARN +1.1%), Javelin (JMI +2.8%), Orchid Island (ORC +1.5%), Five Oaks (OAKS +0.7%), ZAIS Financial (ZFC +1.3%)
Tue, Feb. 16, 9:22 PM
- Q4 net income of $1.78M or $0.05 per share vs. $3.9M and $0.12 in Q3. This includes all mark-to-market adjustments. Dividend is $0.50.
- Book value per share of $21.80 slips from $22.22 three months earlier. Today's close of $16.77 is a 23% discount to book.
- The dividend less the decline in book value yields a positive economic return of $0.08 for the quarter (about 1.4% annualized).
- Roughly 291K shares (less than 1% of the float) repurchased during quarter at average price of $17.23 each, and total cost of $5M.
- Worried about potential shocks in high-yield corporate credit markets spilling over into the types of things in its portfolio, Ellington trimmed leverage during Q4 with sales of both agency and non-agency MBS, says CEO Laurence Penn. Company hopes to use the cash raised to rotate back into targeted assets at discounted prices in the coming months.
- Given the continued sizable discount to book the stock trades at, Ellington expects to continue buying back about $5M of stock each quarter.
- Conference call tomorrow at 11 ET
- Previously: Ellington Financial reports Q4 (Feb. 16)
- EFC flat after hours
Tue, Feb. 16, 9:08 PM
Ellington Financial LLC provides financial investment services and strategies. It is a specialty finance company, which is specializes in the acquiring and managing mortgage related assets, including residential mortgage backed securities backed by prime jumbo, Alt-A, manufactured housing and... More
Industry: Mortgage Investment
Country: United States
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