Friday, March 16, 2012

PMC Commercial Cheap and Receiving Overtures?

Recently, two apparent value stocks were discussed on this site for their looming catalysts, New Frontier Media and Paulson Capital. Add another one to the list; yesterday, in releasing its fourth quarter results, PMC Commercial Trust stated that it has "received certain inquiries expressing a preliminary interest in potential strategic transactions."

In English, this likely means someone wants to buy the company or buy up a significant portion of the company's assets. Considering the company trades at about a 40% discount to its book value (which is mostly made up of loans secured against hotel assets), this could result in a lot of upside for current shareholders.

Because of low interest rates and soft vacation spending since the recession, PMC's earnings have not been great in the last couple of years. However, this potential catalyst could serve to monetize some or all of the loans PMC has made, all the while protecting shareholders from downside risk due to the significant discount to assets at which the company trades.

For more on PMC, see the previous article about this company discussing it as a potential value investment.

Disclosure: Author has a long position in shares of PCC

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