UFMC $4.1 UNDERVALUED COMPANY WITH GREAT UPSIDE
United Financial Mortgage Corp. (Nasdaq: UFMC) is an unknown and undervalued company with huge upside from this point forward.
UFMC is a profitable independent mortgage banker headquartered in Oak Brook, Illinois, currently having 44 retail offices and 8 wholesale operations centers across 16 states.
UFMC announced last month that it is acquiring AmPro Mortgage's eight prime wholesale production offices and AmPro's Phoenix, Arizona, operations center. With this acquisition, UFMC will become the 29th largest residential wholesale mortgage lender in the country and the 58th largest residential mortgage lender in the United States, based on 2004 loan originations.
The AmPro acquisition will be non-dilutive and immediately accretive to earnings according to UFMC. The acquisition will add between $2.4 and $3 billion in annual originations representing between approximately a 90% to 112% increase over UFMC's expected fiscal 2005 originations.
The AmPro acquisition will give will give UFMC a significant presence in states where it currently has no infrastructure, including Arizona, Colorado and Texas, will add scale in other markets where it currently operates, such as Florida and Georgia, and will solidify its already strong presence in California.
There was a minor sell-off on Friday on very low volume after the company reported a loss for 4Q 2004. Net income for 2004 was 22c/share despite the 4Q loss.
The 4Q 2004 loss was due to a non-cash charge of $1.8 million allowance for interest rates. This charge could be reverted to income as conditions change. Without the 4Q charge, 2004 net income would have approached 50c/share.
I believe that all possible negative news are now out of the way and the near and long-term future of UFMC are very bright.
CONSIDER THIS:
* Last Thursday during the CC, UFMC's CEO said that 1Q 2005 started with a "robust" 1Q 2005. Mortgage loan originations for 1Q 2005 are expected to reach $1.4 Billion representing a 56% increase over 1Q 2004 originations.
* UFMC's float is only 3.28 million shares.
* As of June 30, 2004 its book value is $5.09
* Currently trading at 80% of book value.
* Market cap is only $24Million.
* Enterprise value is $224 Million w/o the AmPro acquisition.
* Cash position is $19Million.
* Shareholders equity is $1.2/share
* Currently has 50 offices w/o the AmPro acquisition...up from 35 a year before.
* In June 2005 renegotiated and lowered its borrowing costs to increase margins. 1Q 2005 ends on July 31, 2005.
UFMC announced in May 2005 that it has moved to the Nasdaq from AMEX to increase liquidity and take advantage of the upside that is coming up with the AmPro acquisition. Investors have not realized this yet and the trading volume has remained low. This will change quickly after the company reports very strong revenue and income numbers for 1Q 2005 based on the strong start of the year as announced by the CEO.
Always do your DD
