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MMA Capital Holdings, Inc. (MMAC): Arquitos Capital Management’s Latest Thoughts

Nina Zdinjak

Arquitos Capital Management has just released its Q1 2019 letter, reporting a 5.4% return for the quarter, and a 21.4% return since its inception in 2012. If you are interested you can track down a complet'se copy of the letter here. The fund also posted short comments and updates on several companies in its portfolio including MMA Capital Holdings, Inc. (NASDAQ:MMAC), for which it wrote the following:

"MMA Capital (MMAC) filed their annual report in March and reported even higher book value than I anticipated. This is a situation where a transition is being made from valuing the company by its balance sheet metrics to valuing it on its income statement characteristics. MMAC is solidly profitable and,at some point in the future,will trade at a multiple of the fees it generates. Until that happens, it remains cheap on a price-to-book basis. Book value is $36.20/share. The last trade went off at $30.78.

There is a strong possibility that MMAC will be added to a Russell index over the next few months. We will know for certain in June. If that occurs, we will likely see a more appropriate valuation given to the stock. Even if they are not added to the index this year, they will be at some point over the next few years.

Index inclusion, especially with smaller companies that have a limited public float, can cause some rapid price changes. We saw this with ALJ Regional Holdings (ALJJ)a few years ago when they were added to the Russell Microcap Index.

MMAC has a relatively high percentage of insider ownership and also has a number of large shareholders who are unlikely to sell anywhere near today’s prices. That supply/demand imbalance may be meaningful should the index need to acquire a large number of shares in a short amount of time."

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MMA Capital Holdings Inc is a holding company that operates through its subsidiaries investing in debt capital and bonds that support housing and renewable energy projects. Year-to-date, the company's stock gained 19.22%, and on April 23rd, it had a closing price of $30.64. Its market cap is $179.04 million, while the stock is trading at a price-to-earnings ratio of 3.01.

Disclosure: None.

This article is originally published at Insider Monkey.