MMA Capital Management (NASDAQ: MMAC): Why Alluvial Capital Loves It

Alluvial Capital Management discussed MMA Capital Management LLC (NASDAQ:MMAC) in its Q1 investor letter. MMAC invests in the housing and renewable energy sectors in the United States and internationally. The company is externally managed and advised by Hunt Investment Management, an affiliate of Hunt Companies. Here is what Alluvial Capital said about MMA.

MMA is a long-time Alluvial holding, and we are one of the larger holders of MMA stock. It’s been enjoyable to see our proportional interest in MMA increase as the number of shares outstanding has steadily declined. This years-long process of selling off various assets and applying the proceeds to share buybacks at well below economic value was one engine of returns for MMA shareholders. The other was the company’s successful efforts to build operating businesses. The company has established a profitable and growing solar complex construction lending business and re-entered its specialty low income housing tax credit management business.

In January, the company announced a sweeping transaction with the Hunt Companies. In this transaction, MMA sold its asset management businesses to Hunt and externalized management. MMA’s former leadership is now employed by the Hunt Companies, a move which is expected to save on administrative costs. The Hunt Companies also agreed to purchase 250,000 MMA shares at an average price of $33.50.

Hunt will use “new MMA” as a public vehicle with which to continue MMA’s leveraged fixed income investing and solar construction lending activities.

As a result of this transaction, MMA’s book value per share will rise to at least $32. The current trading price of $27.5 represents a 15% discount to GAAP book value. Book value should see further increases in 2018 from operating earnings and continued share buybacks. MMA will not repurchase its shares at the same breakneck pace as before, but they do have approval to buy 125,000 shares at or below $30 per share. The current trading price represents a discount of roughly 20% to my estimate of year-end 2018 book value. I find this price very attractive, and so do company insiders. Since announcing the deal in January, insiders (including one James Hunt) have purchased nearly $300,000 in company stock on the open market.

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MMA Capital Management LLC (NASDAQ:MMAC) closed up 0.37% at $26.95 on Friday. Its opening price on the last trading day was $26.70. The stock gained 21.35% over the past 12 months, while it jumped 10.20% since the start of this year. Whereas, the company’s share price increased 6.09% over the past six months.

Earlier this month, MMA announced that its subsidiary MMA Energy Capital bought Renewable Developer Holdings LLC, one of the partners in the company’s solar ventures, for around $5.1 million. As a result of the buyout of RDH, MMA is now the sole owner of Renewable Energy Lending. MMA Energy Capital and affiliates of third-party alternative asset manager Fundamental Advisors LP are co-investors in three other solar joint ventures which will continue to make and hold solar loans.