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Hudson City Bancorp, Inc. Message Board

  • JJR1998 JJR1998 Aug 23, 2000 1:25 PM Flag

    The Future of the Mighty Hudson

    Hudson is arguably the best valued MHC in the
    country. There are others that are cheaper (SERC) and
    others that have a better and more diversified earnings
    stream (PBCT) but none combine the quality of this
    business at this price. It's not hard to understand why
    the long-term performance of MHC's is better than the
    All Publicly Traded Thrift Index. Depositors were
    able to buy Hudson at the Adjusted P/B of 58% BECAUSE
    it was an unloved MHC. MHC's work in the long run
    because most, if not all, will eventually second-stage
    and trade on the same fundamentals as any other fully
    converted thrift but we were able to buy them out of the
    gate cheaper.

    Harbor Florida Bancshares
    provided a good example of what we can expect from Hudson.
    Harbor came out in 1994 when MHC's were also selling
    cheaply and 3 1/2 years later when the market was
    stronger, second-staged. It provided a wonderful return to
    those patient shareholders who bought and held. There
    is no better way to maximize our total return than
    doing an MHC in a bad market and second-staging in a
    good one. Let's look at the Hudson
    specifics.

    Every month SNL looks at the MHC's and adjusts the P/B
    ratios to reflect a second-stage offering. They factor
    in a 16% cost for all the expenses associated with
    the offering such as ESOP, MRP, and underwriting. The
    current price represents 66% P/B assuming an offering at
    90% pro forma P/B. That means that if Hudson did a
    second-stage tomorrow at 90% of book, we could expect a 36%
    increase in the value of our shares. This is all
    theoretical and some would say we'd never get those kinds of
    returns now. I agree because of the current market
    conditions but investors have a way of projecting the
    current malaise we are all suffering from in the thrift
    industry, to well into the future. This is a cyclical
    business and in 3-4 years from now, it's highly unlikely
    valuations will be anywhere near here. If anything, SNL's
    projections understate the future returns we can expect from
    Hudson.

    As a mutual institution, Hudson's returns
    have been remarkable over the last 4 years. They've
    increased their equity by 59%. They've increased assets and
    deposits dramatically without any acquisitions. As a stock
    company, they now have the tools to move to the next
    level. Hudson has stated that they plan on aggressively
    managing their capital. Over the next 4 years they will
    (1) annually buyback at least 5% of their shares

    (2) issue an increasing dividend yearly
    (3) grow
    organically by buiding up the branch network
    (4) make
    acquisitions
    It's highly likely our equity per share will be much
    higher in 4 years from now and any second-stage will
    reflect that value. It's important to note that the gains
    don't stop at second-stage. (Some would say this is
    when the real fireworks start). Independent Hudson at
    90% of book would be on everybody's radar screen.
    Takeout at 150-200% P/B is a very real possibility. So
    these projections assume a total return of 20%+
    annualized...well into the future.

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    • JJR - excellent post. Since it looks like the fed
      may be done raising interest rates since rising oil
      and natural gas prices should act as an additional
      break on the economy, I would think that the mortgages
      which are being put in place today at current rates,
      should add to HCBK's earnings. If the economy slows, the
      market (and probably eventually the Fed) will ratchet
      down interest rates thus increasing the spread between
      the cost of the money and the actual rate the money
      is loaned at. I welcome all opinions. Thanks.

    • JJR1998...

      Jim,

      Good to hear from
      you again.

      There are many fine posts on this
      board but, in my opinion, your posts are the most
      intelligent and analytical ones. And perfectly typed to boot.
      I certainly appreciate the effort you put into
      these tutorials...not to mention the time it takes to
      type them out.

      Have downloaded your posts for
      study but, for now, thanks again for all your insights
      on thrifts in general and HCBK in
      particular.


      Jack

    • it`s 11:36 and only 100 shares were sold at 10:12 this morn. What the hell happened to yhe volume on this stock?hudson is the best value? i don`t think so!!! You`re telling me its unloved.
      woe

 
HCBK
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