ThinkEquity commenting MRU Holdings (NASDAQ:UNCL) following quarterly results.
Firm notes that MRU Holdings reported a loss of $0.42 on rev of nearly $2M in the DecQ06. This loss was in line with firms ests. Rev was below est of $4M b/c the co is not booking interest income from its Pre-Prime loans on the balance sheet, as these are off balance sheet pools in its Achiever Fund. In the qrtr, the co originated $35.7M of loans, compared to $45M in the seasonally strongest SepQ06.
Firm notes that MRU intends to do its first securitization in the JunQ07, with higher volumes, rather than in the MarQ, for efficiency. They estimate the June securitization will be $150M. They also think the co will do another securitization of $150M and possibly include about $75M of Pre-Prime loans in the DecQ07 quarter. As a result, analyst fiscal year ests have changed due to timing. The new rev and EPS ests for the Jun07 year are $25.75M in rev and a loss of $0.91 and for Jun08, rev of $48.63M and earnings of $0.16. On a calendar basis, firm est is a loss of $0.10 in C07 and EPS of $1.12 in C08. Firm believes after 07, loan volumes will begin to ramp quickly in all 3 categories and incremental margins driven by scale will push earnings up significantly as the year progresses. As a result, firm maintains $10 price tgt.
Firm says that due to strong demand from investors, the co intends to do a larger securitization in the JunQ07 than originally anticipated for the MarQ07. It may be a pre-funded deal in April for approximately $150-$175M in loans. They believe MRU is well on its way to establishing a strong presence in the private and govt student loan mkt for originations and securitizations, with a strong position in the mkt. Firm reiterates Buy rating.
Notablecalls: Delay in securitization is clearly negative, but may turn out to be non-event for long term investors. Holding my position.