On Wednesday, Janney Montgomery Scott initiated coverage on Cherry Hill Mortgage (NYSE:CHMI) Investment Corporation (NYSE:CHMI), assigning a Buy rating to the company's shares with a price target of $4.00.
Janney's analysts highlighted the company's investment strategy and recent strategic moves as key factors for their positive outlook.
Cherry Hill Mortgage's approach to investment, which combines agency mortgage-backed securities (MBS) with mortgage servicing rights (MSR), is anticipated to yield superior risk-adjusted returns over the cycle. The firm's recent strategic review and decision to internalize management were noted as steps that align the interests of management with those of shareholders, potentially bolstering investor confidence.
The analysts expect the agency MBS portfolio to be a primary driver of the company's book value per share (BVPS) in the near term, with the MSR investment contributing substantial cash carry. This internal management structure is among several elements that are predicted to support dividend coverage.
The stock's valuation is considered overly discounted, which Janney suggests presents an attractive entry point for investors. They forecast a mid-single-digit growth in BVPS and a recovery to 1.0x BVPS. The $4.00 fair value estimate is based on a multiple of approximately 1.0x book value per share and factors in a pro forma dividend yield of 15.0%.
Janney's positive stance on Cherry Hill Mortgage comes following the company's efforts to refine its operational structure and investment focus, which could potentially enhance shareholder value and provide a robust dividend yield.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.