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MMA Capital (MMAC): Why Arquitos Capital Is Crazy About It

New York-based hedge fund Arquitos Capital loves MMA Capital Holdings (NASDAQ: MMAC), a $370-million market cap firm which invests in real estate and renewable energy sectors in the U.S. and internationally. In the fund’s Q4 investor letter – which you can download here – Steven Kiel, the fund’s manager, discussed why MMA Capital “provides a huge benefit” to Arquitos Capital “as shareholders.” In this article, we are going to take a look at Kiel’s comments about MMA. Here is everything that he said:

I have written about the company several times over the years. Amazingly, the company is cheaper now relative to its book value than it has ever been during our holding period.

Estimated book value at the end of Q4 2018 is $35.31. Shares are currently around $26 and had ended the year at $25.20. MMAC has simplified their business significantly and is now primarily a niche asset manager focused on short- to intermediate-term lending on renewable energy-related projects. The company has a large co-investment in the space and earns management and performance fees from the portfolios they manage.

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MMAC also has a huge pile of cash and equivalents relative to their market cap. In addition to trading at 0.7 times book value, they also trade at just 4 times trailing earnings and somewhere between 6 to 8 times estimated 2019 earnings. Finally, they continue to buy back about 10% of their shares each year.

For this reason, the fact that shares trade at such a large discount to book value provides a huge benefit to us as shareholders.

MMAC negatively affected the Arquitos portfolio in 2018. It is a classic example of the stock price being wholly disconnected from the reality of the company. It is our second largest holding. If I could buy more shares, I would.

Maryland-based MMA Capital Holdings (NASDAQ: MMAC) primarily invests in debt associated with renewable energy infrastructure and real estate. Over the past 12 months, the company’s share price jumped over 2%. Whereas, the stock has gained over 6%. Year-to-date, the price is up nearly 11%.

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