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Citizens Republic Bancorp, Inc Message Board

  • market.junky market.junky Oct 9, 2009 1:19 AM Flag

    CRBC & Market Strategy

    There has been considerable discussion on this lately reagrding the price action of CRBC. CRBC recently finished a conversion of various "dept" instruments (i.e., bonds, preferred shares, etc.) for common equity (i.e., stock). Regardless of ones opinion about the benefit to CRBC, debt holders, shareholders, or other stakeholders from the conversion, it can be reasonably stated that there has been a considerable dilution of shareholder equity in CRBC.

    Clearly, CRBC has been locked in a trading range recently between about 0.62 and 0.85. I don't want to get into a nit-picky discussion about the absolute top or bottom of the range. You can take a fat crayon and draw the lines. If you're lucky you can get a fill to buy at the bottom, or sell at the top of the range.

    At the center of most of the discussion has been a few key questions;

    1. What is the current "fair-value" -or- "book-value" for one common share of CRBC?

    2. What are the conditions or events that will lead to a rise in the share value of CRBC?

    3. Given that one expects to see a gain in CRBC sometime in the near future, what is the approximate time frame for the expeted gain?

    My person emphasis has been on risk management. So another set of important questions are;

    1. How large should one's position be realative to rading equity.

    2. At what point does one close out a position (long or short)

    I look forward to a constructive discusion on these or other related topics.

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    • Good Question and here are my 2 cents-
      At the center of most of the discussion has been a few key questions;

      1. What is the current "fair-value" -or- "book-value" for one common share of CRBC?
      Currently Revenues for CRBS is 650million
      Share Count is 394 million
      @ .7 market cap is 275mill
      Fair value for a bank is between 1x-2x of your sales.
      So my target value is $1.64 to $2.5.

      2. What are the conditions or events that will lead to a rise in the share value of CRBC?
      Capital ratios like TCE should hold and reduced taking of Provision expense. Currently they have TCE=6% after capital rise. Last quarter they had $21.4 million of operating profit. They took a provision expense of $100 million. So a net loss of 79million.


      3. Given that one expects to see a gain in CRBC sometime in the near future, what is the approximate time frame for the expected gain?
      No one knows the answer to this question. This could happen on October 22nd or a year from now.


      My person emphasis has been on risk management. So another set of important questions are;

      1. How large should one's position be relative to trading equity.
      I currently invest all my eggs in one basket and monitor it closely. Personally I would like to monitor 5 different baskets at any point so not more than 20%.

      2. At what point does one close out a position (long or short)
      If this hits $1.5 in three months, I will take my money and run, no point holding for the extra 50 cents or so. Remember you hefty taxes and they add up in the end.