Compass Point Starts New Residential Investment (NRZ) at Buy

Compass Point initiates coverage on New Residential Investment (NYSE: NRZ) with a Buy rating and a price target of $19.00.

Analyst Jason Stewart commented, "NRZ is structured as a mortgage REIT and focused on opportunistic investments in the U.S. residential mortgage market. Given the major structural changes that have occurred in the U.S. housing market and the lack of financial support from the banking sector due to increasing capital requirements, NRZ is a unique position to provide capital at above average ROEs. NRZ has focused its investment strategy on three primary areas within the U.S. mortgage market; excess MSRs, servicer advances and non-agency RMBS. NRZ's $400B UPB of excess servicing provides a stable high teens ROE on approximately 65% of invested capital and modest upside optionality in a higher rate environment. The non-agency RMBS portfolio, which includes the associated call rights to 100% of the underlying loans, represents 17% of invested capital and will be the primary source of earnings growth post HLSS acquisition. Our $19 price target is based on a DCF analysis and assumes NRZ can sustain a 15% ROE post 2016."

For an analyst ratings summary and ratings history on New Residential Investment click here. For more ratings news on New Residential Investment click here.

Shares of New Residential Investment closed at $16.96 yesterday.

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