UPDATE: Compass Point Initiates Coverage on Kearny Financial on Unique Investment Opportunity

In a report published Thursday, Compass Point analyst Laurie Havener Hunsicker initiated coverage on Kearny Financial (NASDAQ: KRNY) with a Buy rating and $19.00 price target.

In the report, Compass Point noted, “We initiate with a Buy rating and an $19.00 price target, representing 1.1x market-adjusted fully-converted TB (FCTB). KRNY offers investors a unique opportunity to invest in a well-capitalized, 130+ year old, $3.3 billion-asset sized, NYC-MSA-based bank, at a discount to fully-converted tangible book value. The key to the investment thesis sits in understanding the MHC (Mutual Holding Company) structure and the potential implications for existing shareholders in the event of a second-step IPO. Further, we believe that investors have meaningful downside protection as the discounted valuation offers a very compelling buyback opportunity for KRNY should the shares languish at this level for an extended period of time; given management's track record of execution, we would expect them to continue to capitalize on this opportunity.

"We base our valuation on a blended five-pronged approach: 1) Franchise footprint (including acquisition track record and sensitivity to TB dilution); 2) Current pricing relative to peers (with added emphasis on the P/TB metric for the over-capitalized banks); 3) Credit; 4) Capital (including use of capital management tools); and 5) Management expertise (including inside ownership).”

Kearny Financial closed on Wednesday at $14.54.