UPDATE: Compass Point Initiates Coverage on Clifton Savings Bancorp on Unique Investment Opportunity

In a report published Thursday, Compass Point analyst Laurie Havener Hunsicker initiated coverage on Clifton Savings Bancorp (NASDAQ: CSBK) with a Buy rating and $16.00 price target.

In the report, Compass Point noted, “We initiate with a Buy rating and a $16.00 price target, representing 1.1x market-adjusted fully-converted TB (FCTB); our price target will be exchange ratio adjusted following the offering. CSBK offers investors a unique opportunity to invest in a well-capitalized, 85+ year old, whistle-clean, vanilla (SF lender), $1 billion-asset sized, Northeast NJ-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 implications for existing and new shareholders as CSBK is currently undergoing a second-step IPO. Further we believe that investors have meaningful downside protection as the discounted valuation (which is also virtually at par with the exchange ratio) offers a very compelling buyback opportunity for CSBK should the shares languish at this level for an extended period of time; while CSBK can't repurchase shares until 1-year following IPO, it should be noted that the Board's stance on share buybacks has been very favorable.

"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); 3) Credit; 4) Capital (including use of capital management tools); and 5) Management expertise (including inside ownership).”

Clifton Savings Bancorp closed on Wednesday at $12.90.