Q: At what price does Laurentian Bank become interesting? Yeah, they've had problems but the dividend is pretty high and a while ago you though it was somewhat secure. It is trading at a ten year low price. Plus, if I have the right book value, we have a bank selling well below book value.
Don Coxe used to like quoting Stein's law which says "that which cannot continue will cease." Any thoughts as to how that might play out for this bank? (sell to somebody or eventual price rise or quietly disappearing...)
Don Coxe used to like quoting Stein's law which says "that which cannot continue will cease." Any thoughts as to how that might play out for this bank? (sell to somebody or eventual price rise or quietly disappearing...)
5i Research Answer:
We think we can rule out a sale, at least in the mid term, considering there were no acceptable bids for the company last year when it was up for sale. But, prices can change perceptions, and it is cheaper than it was prior to its sale process. It is trading well below book value, but potential buyers likely were discounting the value of its assets. Its small size likely limits buyers' interest. We think it will trade off its dividend yield for a while, until there is some catalyst (better earnings, strong market, no recession, lower rates). There is value here but we are concerned it may be a value 'trap'.