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Newcastle Investment Corp. Message Board

  • notamiller notamiller Mar 3, 2012 12:09 PM Flag

    Conference call

    My primary take away from the CC is that the management group really wants the stock price to rise. They practically promised a dividend increase for the first quarter. They even bragged about having found the goose that lays golden eggs; that is, as long as it's fed cash.

    I trust no one; but I would rather be in a stock being pumped up by management than one that's not. The challenge is to determine their hidden agenda(s). Pushing the stock up is only part of the story. Are they, in an oblique fashion, pumping Nationstar? How will this affect Fortress management fees? If this MSR goose is as prolific with golden eggs as the CC would suggest, NCT could grow very quickly.

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    • You know I looked at the comparison of the first deal and a portion of the second. If the first deal has the ability to throw off 20M a year in cashflow and it was based on 9B then a 15.75B will have the potential to throw off 35M a year. And that is just a portion of the deal. I use this b/c out of the 63B total 25% of it is in conforming loans, which is the same as the first deal. But more details are needed for the 75% part

    • Dean, if NCT makes an equivalent MSR investment ( to the Dec investment) with the 150 mil cash on hand what does that translate into as cash flow and earnings per share annually ? Also, what is liklihood that the $150 mil may be invested in Northstar MSR's? I have been a NCT investor for 5 yrs with an approx. basis of $8.00 per share and hold 18K shares.

      • 2 Replies to dgmcpa
      • dgmopa, there are 105 million common shares, and Newcastle management says they realized a 20% "base case" ROR on their $44 million investment in Nationstar MSRs. If NCT were to invest their entire $150 million cash hoard at 20% ROR, that would kick off over 28 cents of incremental annual cashflow per share. I wouldn't hazard a guess as to the EPS impact, as GAAP accounting can be quirky, and EPS is difficult to estimate. IMO, cashflow is much more important, because Newcastle funds the dividend out of cashflow thrown off from its legacy CDOs and its "recourse side" investments.


      • In round numbers I believe investing $150M in MSRs would add $10M to the bottom line each quarter, leading the ability to raise the dividend by 10 cents.

    • notamiller, I'm not going to "overthink" this one. Insiders own over 1 million shares of NCT, purchased at the last equity offering price of $4.55. Of course management wants the stock price to rise, along with other shareholders. I agree with you that both CEO Riis and COB Edens expressed their firm intentions on the CC to make additional high ROR accretive investments, and then to raise the dividend. You can view this as an effort to "hype" the stock and to push up the stock price if you wish, but it appears they are just previewing what they think will happen in terms of prospective accretive investments and the likelihood of a dividend hike. IOW, I don't ascribe any "hidden agenda" to Riis and Edens in this instance. One of the main purposes of a corporate CC is for management to discuss the business outlook and prospects. With over $150 million in cash sitting on the balance sheet, it appears NCT management has a clear shot at doing exactly what they say they intend to do. I say if it looks like a duck and quacks like a duck...

    • Don't be too sure about a dividend hike. They were equally optimistic after the Dec. CC and nothing occurred. Sometimes management makes statements that are too optimistic to the disappointment of investors. I'd rather they be more reserved with a surprise to the upside. Their previous comments are most probably the reason the stock price hasn't risen more.

      Hopefully we'll see a modest increase in the dividend this quarter.

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