Buy -- Price 9.27 on July 6
by B. Riley

CATY [has recently been] trading at 16.3 times trailing EPS, and 65% of tangible book value. The [share] price is now 22.8% below our target of 12, based on an 80% TBV multiple applied to the projected $14.71 TBV at June 30, 2010. Similar-sized regional peers are trading at a median TBV multiple of 88.8%. Cathay has had some significant asset-quality deterioration in the past few quarters, and we expect this trend to continue in 2Q09. We are expecting NPLs [nonperforming loans] to continue to climb, but we believe that the severity of losses on the CRE [commercial real-estate loans that are] likely to represent the bulk of future NPLs will be smaller than what the company has experienced in recent quarters, and that the extensive reserve built in recent quarters will provide some cushion to any earnings impact. We expect net charge-offs of roughly $32 million in 2Q09 and a provision of around $43 million ... . We are projecting 2009 and 2010 EPS of 23 cents and 70 cents, versus our prior estimates of 25 cents and 68 cents. We recognize that investor concerns about CATY's concentration in CRE loans (roughly 68% of loans are in CRE or construction) continues to weigh heavily on the stock ... . [The] same concerns also affect many of CATY's regional peers. Yet we believe that Cathay's solid reserve coverage and its strong capital ratios (tangible-common-equity ratio of 6.39%) will ... allow Cathay to perform better than many of its peers ... . We believe that the discounted valuation accorded to Cathay, despite its strong reserve and capital ratios, is unwarranted. With...the stock trading well below [our targets], we're raising our rating to Buy from Neutral. Market cap: $459 million.

13.8

18.2

PE of 6.4 and a PEG of 0.67 The company pays a yield of 2.6%.

Long

20.4

Sector Perform - Price 28.06 on Oct. 30
by RBC Capital Markets
Excluding a three-cents-a-share gain on a branch sale, Cathay's 3Q07 operating EPS of 64 cents beat our estimate by a penny and the Street consensus by two cents. Trends were mixed, with strong balance-sheet growth offset somewhat by significant margin compression and weaker credit quality... lowering our target from 34 to 33 (now 12.5 times 2008E EPS), which assumes CATY shares deserve to trade at a slight discount to the average community bank.

solid

Cathay General was downgraded to Sell, Merrill Lynch said. Estimates also cut, as the company will likely see higher non-performing loans and negative loan repricing.

Downgraded by Oppenheimer from Buy to Neutral