NDE significantly undervalued and underfollowed; Internet loans exploding.
e-MITS Internet lending:
Q1 1999: $193 million
April 1999: $134 milllion.
Q2 1999 run rate: $402 million.
My projected annual run rate at the end of Q2 is $2 Billion!!
E-Loan's run rate is also $2B, and the Company is worth $2B. Indymac is only worth $1.3B with a yield of 9%! "At our processing center here in Pasadena we're using e-MITS," says Chase Financial's (not affiliated w/Chase Manhattan) Mr. Gozian: "We started out as a beta test for the Internet version of the program. e-MITS gives us a decision in 10 minutes or less. It blows away anything on the street." More than one e-MITS beta tester reports that the system is easier to use than either Fannie Mae's Desktop Underwriter or Freddie Mac's Loan Prospector.
e-MITS is an acronym for "electronic mortgage information and transaction system," an automated loan-submission process that IndyMac offers free over the Internet to its approved mortgage brokers.
This Company is not a boring mortgage-backed reit. This is a hot Internet company trading at a ridiculously low p/e of 13. With a high yield and the solid earnings growth that management has projected, the stock has low risk. A conservative investor trying to play the Internet could buy tons of shares. At worst, you might lose 1-2 points or so during a one-year holding period, and you could double to quadruple your money when the Company completes its reorganization, shows off scorching Internet lending statistics, buys back lots of stock, and spins off its loanworks.com Internet lending portal. NDE is also a solid long-term growth company that you could hold on to.
I am impressed by management's aggressivness, especially that of CEO Perry who wants his company to be like Microsoft and takes shareholder value very seriously. Indymac was originally spun out of Countrywide Credit, had some time to fine tune the Company's Internet model, and were toughened by the liquidity crunch in the 2nd half of 1998. Countrywide credit owns about 6% of the stock.
The CEO of Countrywide Credit (the nation's largest independent mortgage bank) said: "I've been doing this for 46 years, I've hired doing this for 46 years, I've hired thousands of people, and I put him at the top of any executive list I've seen.”
NDE has $4 billion in assets, and is trading at a p/e of only
13. Yet, with e-MITS, NDE's loans from the Internet are increasing about 100-150% sequentially!!! Moreover, the Company will probably buy back stock as part of the reorganization.
The e-MITS Internet loan origination technology is awesome. Sutro & Co says that it has the "most automated service and fastest turnaround time," and mortgage brokers love it. Gary Bierfriend, managing director of IPI Financial Services Inc., the largest broker in New York and another e-MITS beta tester says: "This system tells you upfront exactly what documents you need. I now have loan officers working from their homes on weekends and late evenings getting decisions on complicated loans that formerly required them to spend weeks assembling a package, getting it before committee and waiting for approval. It has saved us a tremendous amount of money and resources for processing and underwriting staff."
Indy Mac does not expect a competitor to step forward any time soon with a match for its new system. Sharad Nishith, Indy Mac's senior vice president for third-party electronic commerce, explained, "It would take tens of millions of dollars to duplicate e-MITS. A significant portion of that is re-engineering your internal systems and retraining your people so that they don't underwrite the loan again just to make sure the data the customer has submitted is accurate."
Key articles in mortgage industry trade magazines only add to NDE's credibility and growth model. See articles in Grant's Interest Rate Observer (one of the most respected and well known magazines) and American Banker.
I've been investing for over 6 years, and this stock looks like one of greatest opportunities I've ever seen because of its low risk combined with explosive potential. The stock may not quadruple in 2 years as I expect, but that's ok given that the p/e is 13, I get a 9% yield, and the Company intends to buy back stock.
This stock also has options.
I apologize for the poorly organized nature of this article. I usually write fairly clear and concise analyses, but it's been a while and I don't have enough time resources to make this article short and to the point.
loanworks.com
See indymac.com for links to sources I've mentioned.
Philip
Disclaimer: Invest at your own risk. Information provided for discussion purposes only and not to be considered investment advice. Although I've tried to gather accurate information, the information in this article and the analysis contained therein is NOT guaranteed to be accurate. Do your own research. |
