UWM Holdings Corporation

UWMC Details

Q4FY20 Performance Update: UWM Holdings Corporation (NYSE: UWMC) is an indirect parent of United Wholesale Mortgage, LLC that underwrites residential mortgage loans. The market capitalization of the company as on 08 April 2021 stood at ~$12.55 billion. UWMC has reported UWM’s Q4FY20 net income at $1.37 billion, compared to $148.9 million in the previous corresponding period. There was a significant increase in the equity of the company to $2.37 billion as of 31 December 2020, compared to $661.3 million on 31 December 2019. It reported an impressive origination of $54.7 billion in loan volume, an increase of ~71% on the pcp.

Q4FY20 Financial Performance (Source: Company Reports)

Outlook: The company has started to provide jumbo offerings, which is expected to materially increase purchase volume during the remainder of 2021.  It plans to close loan volume between $52 billion and $57 billion in Q1FY21, and anticipates a margin gain of 200-235 bps.

Valuation Methodology: P/CF Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:  On 30 March 2021, the company announced that its indirect subsidiary UWM has priced its offering of $700 million aggregate principal amount senior notes at an interest rate of 5.5%, and will be issued at a price of 100% of its face value. The current ratio of the company is at low levels of 0.05x in Q4FY20, down from a level of 0.97x in Q4FY19. The stock of UWMC is trading below its average 52-weeks’ levels of $14.38-$7.24. The stock of UWMC gave a negative return of ~9.9% in the past one month and a negative return of ~37.08% in the past three months. On a technical analysis front, the stock of UWMC has a support level of ~$7.54 and a resistance level of ~$8.03. We have valued the stock using a P/CF multiple-based illustrative relative valuation and have arrived at a correction of low single-digit (in % terms). We believe the company can trade at a slight premium to its peer median P/CF (NTM Trading multiple), considering the decent financial position and growth in loan volumes. For the purpose, we have taken peers such as Ares Commercial Real Estate Corp (NYSE: ACRE), Ellington Financial Inc (NYSE: EFC), Annaly Capital Management Inc (NYSE: NLY), to name a few. Considering the steep decline in price in the past few months, the decrease in liquidity of the company and the key risks associated with the business, we give an ‘Avoid’ rating on the stock at the closing price of $7.82, up by 0.9% as on April 08, 2021.

UWMC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Ashford Hospitality Trust Inc

AHT Details

Q4FY20 Update: Ashford Hospitality Trust Inc (NYSE: AHT) is a real estate investment trust (REIT) that is engaged in investing in upper-upscale and full-service hotels. The market capitalization of the company as on 08 April 2021, stood at ~$288.12 million. For Q4FY20, the company has reported a net loss of $70.5 million, taking the net loss for the full-year to $520.5 million. The comparable RevPAR for all the hotels decreased to $35.70 during the quarter. The adjusted EBITDAre stood at negative $23.1 million during the same period under consideration. The cash position of the company stood at $92.90 million as of 31 December 2020.

Q4FY20 Financial Performance (Source: Company Reports)

Outlook: The company has announced that it plans to issue the earnings release for the first quarter of FY21 on 4 May 2021.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: On 15 Jan 2021, the company has announced the close of strategic financing of $200 million from funds managed by Oaktree Capital Management, L.P. It has the option to draw an additional $250 million if required. The stock of AHT is trading below its average 52-weeks’ levels of $18.80-$1.27. The stock of AHT gave a positive return of ~10% in the past three months and a negative return of ~10.20% in the past one month. On a technical analysis front, the stock of AHT has a support level of ~$1.423 and a resistance level of ~$3.78. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a correction low single-digit (in % terms). We believe the company can trade at a slight discount to its peer median EV/Sales (NTM Trading multiple), considering the decrease in profitability and the uncertain economic environment. For the purpose, we have taken peers such as Braemar Hotels & Resorts Inc (NYSE: BHR), Hersha Hospitality Trust (NYSE: HT), Diamondrock Hospitality Co (NYSE: DRH), to name a few. Considering the muted financial performance, uncertain business outlook and the key risks associated with the business, we give an ‘Avoid’ rating on the stock at the closing price of $2.64, up by 0.38% as on April 08, 2021.

AHT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.