The valuation of R&G Financial (RGFC.PK) which just sold its Florida Bank to Fifth-Third bancorp. I estimate it is selling at half its value and will probably double if/when it return to the NYSE from the pinksheets.
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Shares
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21,559,584 Class A
29,561,190 Class B
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51,120,774 Common shares
Liquidation value of Preferred stock
Series A 50,000,000
Series B 25,000,000
Series C 69,000,000
Series D 69,000,000
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total 213,000,000
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Equity (based on Bank Holding Company data, after restatement)
http://www.chicagofed.org/economic_research_and_data/bhc_data_2001_2006.cfm
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544,945,000 As stated on BHC form
- 213,000,000 Preferred
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331,945,000 Equity for Common shares
- 118,569,000 Non-tangible servicing asset (though not worthless)
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213,376,000 Tangible Book Value
6.49335 Book value per share
4.17396 Tangible book value per share
3.02 Cohen (former analyst) estimate of Tangible book value per share
211,685,000 Other assets, probably mostly derivatives included in book value
Interest rate derivatives, probably OK
723,721,000 Listed on BHC as intangible and other assets
255,816,000 Listed on BHC as other liabilities
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467,905,000 Diff between these two
------------------Changes with sale of Crown bank--------
Price payed
288,000,000 For crown bank
50,000,000 Paying off preferred shares
16,000,000 Real estate
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354,000,000 total payed
226,000,000 tangible assets of Crown bank
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128,000,000 Gain in tangible assets for RGF common stock holders
213,376,000 Old Tangible Book Value
+128,000,000 Gain in tangible BV
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341,376,000 New tangible BV
6.67783 New Tangible BV per share
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If Cohen's number is right
285,451,984 New tangible BV
5.58387 New tangible BV per share
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3.90 Price per share on May 30
69.84% Fraction of tangible BV
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-------------Valuation----------------
Even a poor bank is worth about 1.5x tangible book value per share
Using TBV=5.58387
This is
Value = 8.3758
which is over twice the current price
Other scenarios:
The deal falls through. It needs to sell out like Doral to obtain cash. Value = 1.5 /share. Probability 10%
The deal goes through but tangible equity declines by $50M. Value = 6.0/share Probability 10%
The deal falls through and they fail. Value =0 Probability 5%
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Value = 0.75*8.4 + 0.1*1.5+ 0.1*6 = $7.05/share
I will take as my value 7.0/share which makes it a buy at 3.90 however with the risk involved I can only put a small amout of my money into it.
############## UPDATE #####################
RGF announces that the think the restatement will be about $240 million after taxes. They had figured $185-$200M previously. On their BHC form they listed -$264,637,000 as accounting restatement which is probably pretax.
So I think we subtract about $50M which gives us about 230-280 of tangible book or $4.5-$5.5/share. It is selling at
$3.95/share today. Still pretty cheap but worth the risk? Investors did seem to like Doral once it got an infusion. Maybe RGFC.PK is worth a few bucks. I think the chance of doubling is still very good and chance of failure small.
Also the $16M is not for RGF sharholders
8-K about FHA license being taken away. Hopefully temporary.
Price on July 23, $2.60/share WOW!!!
##################### Update ###########################
12/2007 Holding company report out
Common book value down to $125MM. There is $523MM in either 30 days late or non-accrual. They have recently said that they are probably not going to pay any more preferred dividends. They are now deteriorating quickly. It could be the end for RGF. They will likely need to sell the bank in order to avoid being seized by regulators. Yikes.
