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New York Mortgage Trust (NYMT) Initiated At 'Buy' By Deutsche Bank

 December 21, 2012 03:13 PM


(By Balaseshan) Deutsche Bank analyst Stephen Laws initiated coverage of New York Mortgage Trust Inc. (NASDAQ: NYMT) with a "Buy" rating and $7.25 price target, saying portfolio growth to drive 2013 return on equity expansion.

In October, NYMT raised just over $100 million through a secondary offering, which we expect to fund new investments into agency MBS, multi-family commercial mortgage-backed securities (CMBS), and/or pools of distressed residential first lien mortgages, Laws noted.

The analyst expects the new investments to drive return on equity (ROE) expansion in 2013. Given this and with shares trading below our post-deal book value estimate, he is initiating coverage with a "Buy" rating.

During 4Q, NYMT expects to close $83 million of new multi-family CMBS investments and to acquire a pool of residential distressed first lien mortgages, Laws noted. Additionally, the company raised roughly $104 million in net equity proceeds and entered into a three-year repurchase agreement to fund new CMBS investments.

The analyst expects new investments in multi-family CMBS, agency RMBS, and residential loans to drive earnings growth in 2013. His price target is based on shares trading at 110% of his pro forma book value estimate of $6.58 per share, which is adjusted for the October offering.

Since 2008, managers of hybrid MBS portfolios have traded in the range of 75% to 120% of book value. Laws believes a 10% premium to book value is appropriate given the company's diversified portfolio, while taking into account the company will likely look to continue growing the balance sheet when stock issuances are accretive to book value.

NYMT is trading down 1.19% at $6.24 on Friday.

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