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Non-Tech : Aames Financial (AAM) - Undervalued or what??? -- Ignore unavailable to you. Want to Upgrade?

To: Bankceo who wrote (323)	12/8/1997 1:06:00 PM
From: John	Read Replies (1) \| Respond to of 510

Hi Bankceo: I enjoy reading your posts and outlook for AAMES. Here is a press release you will enjoy reading.......Happy Holidays, John biz.yahoo.com Monday December 8, 11:39 am Eastern Time Company Press Release SOURCE: Fitch IBCA, Inc. Aames Unsecured Debt Affirmed By Fitch IBCA - Fitch IBCA Financial Wire - NEW YORK, Dec. 8 /PRNewswire/ -- Aames Financial Corp.'s $173 million 'BB' senior notes and $115 million 'BB-' convertible subordinated notes are affirmed by Fitch IBCA and removed from FitchAlert negative. Aames was placed on FitchAlert negative on Aug. 26, 1997, following the announcement of a $28 million ($16.2 million after tax) write down of its interest-only (IO) strip during the fourth quarter ended June 30, 1997. The revaluation of its IO strip was needed due to prepayments related to correspondent adjustable rate mortgage (ARM) originations that were higher than original securitization assumptions. The affirmation reflects the company's more conservative securitization assumptions, shift in distribution channels, adequate reserves based on loss experience and the ability to service its entire portfolio, which allows the company to increase cash income and retain customers. Concerns center on increased competition and resultant impact on margins, increased net chargeoffs and rapid expansion. Following the writedown, Aames has reduced its correspondent/bulk originations and is aggressively building its retail and broker (One Stop) origination platforms. Correspondent originations have declined to 24% of total originations for the three months ended Sept. 30, 1997 from roughly 50% of total originations for fiscal 1997. By reducing correspondent originations, Aames is able to reduce the severity of its negative cash flow position, since the company avoids paying points upfront. By building its retail branch network, Aames is closer to the borrower, thereby improving customer retention. Overall asset quality remains adequate as delinquencies have continued to trend downward to 14% at Sept. 30, 1997 from 16% at fiscal 1996. However, since the company has shifted its focus to A- and B quality borrowers, net chargeoffs have risen. A shift to a higher credit quality borrower results in lower delinquencies because the borrower has better payment habits relative to lower credit quality risks. However, rising loan to value (LTV) ratios could result in a higher severity of net chargeoffs. Net chargeoffs have risen to 51 basis points (bps) (annualized) for the three months ended Sept. 30, 1997 from 9 bps in fiscal 1996. Nonetheless, Aames is adequately reserved, as evidenced by the 2.9 times (x) reserve to net chargeoff coverage at Sept. 30, 1997. Fitch IBCA believes Aames' securitization assumptions are appropriate, given the increase in ARM prepayment and annual loss assumptions. Additionally, the company does not ramp its prepayment and loss assumptions, thereby building a reserve cushion. The company has performed well for the first quarter ended Sept. 30, 1997, recording $13 million in net earnings. Aames is focused on increasing cash income via servicing fees, whole loan sales of its 125% LTV and commercial production, as well as fees associated with retail originations. Return on average managed assets has rebounded from 0.65% in fiscal 1996 to 1.37% in the first quarter ended Sept. 30, 1997, although below industry peers. Aames, founded in 1954, is a specialty finance company that originates, purchases, services and sells home equity loans to those credit-impaired borrowers who have substantial equity in their home but are unable to access financing from more traditional financial institutions. Aames has been growing rapidly since 1994 and is generally recognized as among the leading specialty finance companies in this sector. SOURCE: Fitch IBCA, Inc

To: Bankceo who wrote (323)	12/12/1997 2:34:00 PM
From: Bill De	Read Replies (1) \| Respond to of 510

I am trying to be optimistic but I'm having a hard time with three issues. One is the shorts. I still can not understand why they did not cover at 10/27/97 or 10/28/97 when the stock was trading at $9-$10 a share. I can't believe they are willing to give up $3-$4 a share. They only thing I can assume is that they believe they stock will not close higher than $13 a share by year-end. And in addition, they are probably sitting on huge gains when they do cover (most of these shorts started in July and August when the price was in the high teens and twenties) so they are attempting to defer their tax gains until 1998. If that is the case, than then I agree with you that they should all cover in January. Unless of course, they feel that $10 a share is not the bottom. I again looked at AAM's chart and see no support for $16 by 12/31/97. The stock rallied on 11/03 and 11/04 to high of 15.75 after earnings were announced in October. The rest of the month has been a disaster although it tested $14.6875 on 11/07. Even after the shareholders meeting on 11/19 it again started a downward trend. It tested $14.125 on 12/04 and as normal collapsed. The last time I looked at the price today it was at $12.6875. There is not support to push it up to $14. There is just too much resistance at this point. So I do not see AAM going much higher by year-end. Maybe that's why the shorts have not covered. There are only about 10 or less trading days left in 1997. Hopefully they are gambling that the price will stay put for the rest of the year and then cover in 1998. That's optimistic. If they do not cover early in January than we do have a serious problem especially if the shorts increased this month. Keep in mind the day that Fitch affirmed their unsecured debt on 12/08 the stock price went down. That bothers me because it was the most positive news regarding AAM by an independent source since June. And the stock could not even hold. So even good news can not help AAM. The resistance will continue to keep the price around $13 for the year. I do not see it moving up $3 a share by year-end. Secondly, I agree with you that the institutions are rapidly selling off. Although I did see a block of 70,000 shares purchased recently. But I still don't see them jumping in big time in January especially with the current market. Once the fears of the South East Asia crisis subside and the poor earnings are cast in concrete there will be a lot of bargains out there. Many of the big high-tech companies will be a true bargain in the eyes of many investors. They always are. I believe that is where a lot of fund money will return. If they have "let's wait and see" attitude regarding AAM the price will stay in this current range. The average investor and management are not strong enough to make the stock go upward. So again it is critical for the shorts to cover or the institutions to jump back in January. We have about four weeks to find out. I really don't see any major upward movement in price until Q-2 earnings come out (or if the shorts cover before hand). If something does not happen on that day AAM may sink lower than $10. Thirdly, I am concerned about a potential acquisition. You had indicated that it would most likely be a bank that would acquire AAM. I agree. But you also said that they might be reluctant to take on such risk. I believe that is the problem combined with what management thinks that the company is worth. AAM has been on the market for close to 12 months now and there are no takers. I have to believe that most every bank has looked at AAM. Why are there no takers? As I previously stated this is a relatively small deal which would probably be all cash. Management may be having a hard time convienceing a suitor of it's worth or potential. Without an acquisition I do not see the price going over $25 a share in the next 12-18 months, unless of course, this whole industry turns around. Any thoughts?