FBR Research Upgrades Cathay General Bancorp (CATY) to Market Perform; Valuation Call
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FBR Research upgrades Cathay General Bancorp (CATY) from Underperform to Market Perform, price target of $8.50.
FBR analyst says, "Upgrading CATY to Market Perform and maintaining our FY09 and FY10 core EPS estimates of ($2.20) and ($1.35), respectively, and establishing our FY11 core EPS estimate of ($0.25). The strong pullback in the shares since the capital raise has improved our view of the valuation in the context of our FY11 outlook. While we still expect CATY to lose money through 1H11, and believe losses in 4Q09 could jump materially as appraisal activity accelerates, we think downside risk following the sell-off is more limited in light of (1) our belief that CATY likely has enough capital to weather the remainder of the cycle, (2) our expectation that TBV/share troughs at a decent premium to the current share price, and (3) the potential that CATY may be able to win a small FDIC-assisted transaction at some point over the next 12 to 18 months. We could become more positive on the shares were we to gain a greater level of conviction that an FDIC-assisted transaction opportunity within the ethnic Chinese banking arena will emerge in the near term, or were our expectations for NPA and loss trends to improve considerably."
"Over the longer term, we estimate CATY could post normalized EPS in the $1.20 to $1.60 range; but investors may have to wait until 2013, or beyond, as CATY has relatively higher levels of late-cycle exposure and has only recently begun to take a more aggressive approach to loss recognition."
To see more analyst ratings on CATY Click Here.
Cathay General Bancorp operates as the holding company for Cathay Bank, which offers various commercial banking products and services for individuals, professionals, and small to medium-sized businesses primarily in California.
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