SBCF once traded for $30.00. Using round numbers, lets say I buy it for $2.00, everything goes right over the next ten years and SBCF goes back to $30.00. I make a $28.00 profit and the most I could have lost was $2.00. In your opinion, even though you may be negative on SBCF for very good reasons, isn't this type of risk/reward worth doing?
Last time Seacoast hit $30 a share was end of July 2006. The following is based on a review of the 6/30/06 Form 10Q, the latest public filings prior to the peak in stock price.
Basic Ave Shares Outstanding were 18,727,475
Basic Earnings per share for first six months of 2006 were $0.69 per share, or annualized to $1.38 a share.
Annualized earnings rate would be 18,727,475 shares times $1.38 basic EPS equals $25.8 million net income.
PE be about 22 based on $30/share divided by $1.38 EPS, but historically a PE of 10 to 12 is more realistic for a bank.
Now fast forward to today and see what it would take to get to a price of $30 a share.
Common Shares outstanding have exploded to about 60 million. They haven’t filed their 10K yet at 12/31/09, so I’m just using round numbers. Assuming you need that same $1.38 a share EPS to support a $30 stock price, you now need annual income of $1.38 times 60 million shares or $82.8 million which is about twice the best year earnings level Seacoast has ever had.
But they’ve shrunk the balance sheet by more than 10% and PE is likely to be more in the 10 range than the 22 from June 2006, so you’re probably looking at a need to earn somewhere between $125 to $150 million to support a $30 stock, which would be an ROA 5.9% on the current balance sheet (where an ROA over 1% is considered an extremely profitable bank).
Granted a lot could happen in 10 years, but I wouldn’t count on seeing a $30 share price at Seacoast in 10 years, or 20 years for that matter. I think the impact on Seacoast of the great recession and their stupid decision to place all their eggs in the commercial real estate development basket will result in a permanently impaired bank that will not see its formal glory for a generation, if ever. Just one man’s opinion.
Obviously, I don't think $30 is realistic anytime soon, if ever, with the biggest variable being the # of shares outstanding. At peak, as you indicated, SBCF had a market cap of roughly $570M. With that same market cap with the serious dilution, that would require a price per share of roughly $9.50. Realistically, provided the bank can survive (seems they will) and get the gears cranking again (which may take a couple of years), a reasonable target price would be $6-$7 per share - which is still significantly higher than $1.80.
If you take dividend payout, SBCF used to pay out $0.64/share per year at peak. Again, with the # of outstanding shares now vs. prior, to pay out $0.64, the total dividend payout would be roughly $38M vs. $12M - this is likely VERY unrealistic.
A more likely scenario would see an annual dividen return to say $0.08-$0.10 per share or total payout of roughly $6M per year. I would think the bank would be more conservative with payouts and may not have the big earnings to justify a payout of $12M per year as they used to.
If you take their average 5-year dividend yield, 2.9% (which is likely skewed higher because they continued to payout $0.64/share/yr. even while the stock was at $8, etc., that would still put the stock at $3+ per share - again provided they can get the dividend re-instated at some point. A $0.10/yr. dividend and $5 stock price would be a 2% yield - not unrealistic, at least in terms of ratios - and $1.80 to $5 is not a bad deal either.