Disclosure: Atrium Mortgage Investment Corporation has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
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Price and Volume (1-year)
*See important disclosures at the bottom of this report rating and risk definitions. All figures in US$ unless otherwise specified.
Loan advancements were up 20% YoY; repayments were down 7% YoY. Net mortgages outstanding were down 1% QoQ to $867M
Source: Company Data / FRC
Anticipating higher repayments in Q2, management expects a temporary decline in portfolio size. We believe transaction volumes will pick up in H2-2024, driven by lower interest rates
Source: Company Data / FRC
LTV and exposure to first mortgages increased. The average mortgage size and duration decreased. No material changes in exposure by property-type
Increased exposure to ON. Stage three (impaired) mortgages decreased by $16M QoQ, to 2.4% of mortgages (net)
We are maintaining our forecast for 2024 loan loss provisions at $15M (Q1: $3.9M). In summary, we believe the portfolio’s risk profile has decreased due to lower stage three mortgages, and higher first mortgages
Q1-2024 revenue was up 6% YoY, amid higher lending rates, but missed our estimate by 1%. EPS was down 18% YoY, driven by higher loan loss provisions, but aligned with our estimate
Source: Company / FRC
*The calculations in the above table are approximates as we used the average of beginning and end of period mortgages outstanding.
Annual regular dividends remained unchanged at $0.90/share. Debt to capital remained within historic levels (40%-45%)
We are not making any material changes to our 2024 estimates
Our estimate for the 2024 dividend varies between $0.77 and $1.43/share, using various YoY increases in loan loss allowances
Sector multiples are down 3% since our previous report in February 2024, and 26% below pre-pandemic levels.
Our fair value estimate decreased from $13.42 to $13.21/share due to lower sector multiples
We are reiterating our BUY rating, and adjusting our fair value estimate from $13.42 to $13.21/share, implying a potential return of 28% (including dividends) in the next 12 months. Key risks include a softer mortgage origination market, and higher default rates. Anticipating lower interest rates, we foresee a potential rally in MIC/financial stocks in H2-2024. Although lower rates can compress profit margins, the resulting economic boost, and potential for higher valuations, will likely have a more significant positive impact.
We believe the company is exposed to the following risks:
