On Thursday, Jones Trading reiterated a Hold rating on Sachem Capital Corp . (NYSE: NYSE:SACH) with a maintained price target. The firm's analysis followed Sachem Capital's recent financial performance, which revealed a GAAP EPS of ($0.13), falling short of both the analyst's ($0.01) estimate and the consensus mean of $0.02. The adjusted EPS was reported at $0.04, influenced primarily by an $8.1 million credit loss provision for the quarter.
The deviation from expected GAAP EPS was attributed to the Current Expected Credit Loss (CECL) provision, which surpassed the analyst's projection of $3.2 million. Credit reserves have increased to represent 424 basis points of the total loan portfolio, up from 288 basis points as of June 30. This rise is particularly associated with office properties, which made up 13.3% of the portfolio as of September 30.
Sachem Capital has initiated the sale of $78.8 million worth of loans, primarily consisting of nonaccrual loans valued at $41 million and commercial loans. The company anticipates selling these at approximately 70% of par, which could result in losses of around $23.6 million. With 12 bids received for the loans, the sale is expected to close around December 18, following a bid deadline of December 4. The proceeds are projected to be sufficient for the repayment of the company's $34.5 million December 2024 Notes, in conjunction with the available cash of roughly $5.9 million as of September 30.
Post-sale, Sachem's loan portfolio is expected to stand at approximately $398 million, with nonaccrual loans comprising $106 million or 26.6% of gross loans, an increase from 21.4% at the end of the second quarter of 2024. Additionally, the company has reduced its dividend for the second consecutive quarter, now at $0.05 per quarter, down from $0.08 in the second quarter and $0.11 in the first quarter. The firm concluded by stating a more favorable entry point and catalyst are necessary before adopting a more positive stance on Sachem Capital shares.
In other recent news, Sachem Capital Corp. reported a Q2 net loss of $4.1 million on revenues of $15.1 million. The company also revised the compensation package for its CFO, Nicholas M. Marcello, and declared a dividend for preferred stockholders. In investment news, Sachem Capital acquired a 20% stake in Shem Creek Capital for $5 million, diversifying its business model and opening avenues for potential expansion.
Analysts at Oppenheimer and Jones Trading maintained their ratings on Sachem Capital, despite lower than expected GAAP earnings per share (EPS) due to a higher-than-anticipated credit loss provision. These recent developments show Sachem Capital's plans to adopt a cautious stance on new loan originations, focusing on protecting the existing loan portfolio.
InvestingPro Insights
Recent InvestingPro data provides additional context to Sachem Capital Corp.'s (NYSE: SACH) current financial situation. The company's market capitalization stands at $85.6 million, with a Price to Book ratio of 0.37, indicating that the stock is trading below its book value. This aligns with the InvestingPro Tip that SACH is "Trading at a low Price / Book multiple," which could be of interest to value investors.
The company's dividend yield is currently at 10.26%, supporting the InvestingPro Tip that SACH "Pays a significant dividend to shareholders." However, it's worth noting that the dividend growth rate has been negative at -61.54% over the last twelve months, which is consistent with the article's mention of consecutive dividend reductions.
SACH's stock price has experienced significant volatility, with a 6-month total return of -37.03% and a year-to-date return of -44.6%. This performance supports the InvestingPro Tips indicating that the "Stock has taken a big hit over the last six months" and is "Trading near 52-week low."
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for SACH, providing a deeper understanding of the company's financial health and market position.
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