Connecticut Bancshares, Inc. (SBMC) rated a Buy
Solid quarter for SBMC ($20.28), soon to be 3rd largest headquartered in state.
SBMC reported earnings of $0.34 per share for 1Q01, in line with consensus and Friedman Billings Ramsey & Co. (FBR) estimates. Excluding securities gains, core earnings totaled $0.33 per share, up from core 4Q earnings of $0.32.
Margins expanded 6 basis points during the quarter to 4.14%, as deposits grew and the asset shift continued as securities dropped and loans increased.
Asset quality continued to remain high, with NPAs/Assets of 0.52%.
On February 8, 2001, Connecticut Bancshares entered into an agreement to acquire First Federal Savings and Loan Association of East Hartford (Nasdaq: FFES) in an all cash transaction valued at $110 million that will take SBMC from the 4th to the 3rd largest publicly traded financial institution headquartered in CT.
Despite an in-line quarter, the fundamental trends appear stronger than expected and FBR raised their 2001 EPS from $1.38 to $1.44, and their 2002E EPS from $1.72 to $1.80, taking into account the FFES acquisition.
Recommendation. FBR reiterated their Buy rating and raised their 12-month price target from $25 to $27, which represents 15x 2002E EPS, consistent with two-year earnings growth. SBMC, trading at book value and 11x 2002E EPS, is attractively priced relative to other New England community banks and thrifts, which trade on average between 145%-150% of book value and 11x 2002 estimates. |
