Walker & Dunlop (WD)
|
CompareValuationRatios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% profit |
|
annualizing Sept 9 mos for WD |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
margin |
|
Walker & Dunlop (WD) |
$329 |
2.9 |
14 |
2.2 |
2.2 |
34% |
|
NewStar Fin (NEWS) |
$476 |
3.8 |
22 |
0.9 |
0.9 |
29% |
|
annualizing 6 mos ended Sept |
|
|
|
|
|
|
|
. Loan demand expected to increase
. Selling 46% in the IPO |
|
BUSINESS |
|
. Originates and sells multi-family through Fannie Mae (FNMA) and Freddie Mac (FMCC).
. Funds loans for GSE and HUD programs through warehouse facility financings and sells them to investors in accordance with the related loan sale commitment, which WD obtains prior to loan closing
. Does not fund loans from WD’s balance sheet and during the loan commitment, cloising & delivery process is not exposed to interest rate. |
|
DEMAND FOR LOANS EXPECTED TO INCREASE |
|
A substantial amount of commercial real estate loans is scheduled to mature in the coming years.
. According to the Federal Reserve Flow of Funds Accounts of the United States, approximately $3.2 trillion of commercial real estate loans were outstanding as of June 30, 2010, of which approximately $843 billion were multifamily loans.
. It is estimated that $28 billion to $40 billion of multifamily loans held by investors other than commercial banks will mature each year from 2011 to 2014, according to the Survey of Loan Maturity Volumes, Mortgage Bankers Association.
. This amount would be considerably higher if it included multifamily loans held by commercial banks. As this debt matures, real estate owners will be required to repay or restructure their loans. In these scenarios, new debt will almost always be required, which WD believes will provide significant opportunities.
. WD further believes that demand for multifamily and other commercial real estate loans will increase as the overall economy improves |
|
RISK SHARING |
|
. Has risk-sharing obligations on most loans originated under the Fannie Mae DUS program.
. When a Fannie Mae DUS loan is subject to full risk-sharing, WD absorbs the first 5% of any losses on the unpaid principal balance of a loan, and above 5% shares a percentage of the loss with Fannie Mae, with the maximum loss capped at 20% of the unpaid principal balance of a loan (subject to doubling or tripling if the loan does not meet specific underwriting criteria or if the loan defaults within 12 months of its sale to Fannie Mae |
|
REGULATORY OUTLOOK |
|
. WD expects some degree of regulatory change is likely. Congress and other governmental authorities have also suggested that lenders should be required to retain on their balance sheet a portion of the loans that they originate, although no regulation has yet been implemented.
. WD may be subject to additional liquidity and capital requirements.
. Separately, Fannie Mae has recently increased its collateral requirements under the Fannie Mae DUS program from 35 basis points to 60 basis points, effective January 1, 2011.
. The incremental collateral required for existing and new loans will be funded over approximately the next three years, in accordance with Fannie Mae requirements. Fannie Mae also has indicated that it intends to reassess the adequacy of its collateral requirements on an annual basis, starting as of October 2011. |
|
COMPETITION |
|
Commercial banks, commercial real estate service providers and insurance companies, some of which are also investors in loans WD originates. |
|
USE OF PROCEEDS |
|
$90mm from sale of 6.7mm shares. Shareholders intend to sell 3.3mm shares, 49% of the IPO |
|
Execute growth strategy, fund working capital and for other general corporate purposes. |
|
Walker & Dunlop |
WD, C+, 7 |
|
|
|
|
Post IPO shares: 22mm |
|
Sells commercial mortgages |
|
|
|
|
|
|
|
Bethesda MD |
2007 |
2008 |
2009 |
Sept9mos09 |
Sept9mos10 |
IPO Mkt |
|
Revenues ($mm) |
$50 |
$49 |
$89 |
$62 |
$86 |
Cap (mm) |
|
Personnel % of revenue |
33% |
35% |
36% |
39% |
34% |
$329 |
|
Operating income % |
33% |
29% |
32% |
29% |
34% |
|
|
Net income (loss) |
$10 |
$9 |
$29 |
$22 |
$18 |
@$15 |
|
Net income % of rev |
20% |
18% |
32% |
35% |
21% |
|
|
note: net icome for Sept 30, 2009 nine months included a one tme non-recurring gain |
|
|
|
|
Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
|
annualizing Sept 9 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
|
Walker & Dunlop (WD) |
$329 |
2.9 |
14 |
2.2 |
2.2 |
46% |
|
SCORECARD |
|
Mgt |
Market |
Market Do- |
Proprie- |
Total |
|
1-5, 5 is high |
|
|
Growth |
mination |
tary |
rating |
|
20 is perfect |
|
2 |
2 |
2 |
1 |
7 |
|
CompareValuationRatios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% profit |
|
annualizing Sept 9 mos for WD |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
margin |
|
Walker & Dunlop (WD) |
$329 |
2.9 |
14 |
2.2 |
2.2 |
34% |
|
NewStar Fin (NEWS) |
$476 |
3.8 |
22 |
0.9 |
0.9 |
29% |
|
annualizing 6 mos ended Sept |
|
|
|
|
|
|
|
