BTIG maintains neutral on Great Ajax shares, eyes stable book value

On Friday, BTIG maintained its Neutral rating on shares of Great Ajax Corp . (NYSE: NYSE:AJX), following investor meetings held earlier this week. The real estate investment trust, which focuses on acquiring, investing in, and managing a portfolio of mortgage loans, was the subject of discussions that highlighted several key points about its operations and future plans.

During the meetings, Great Ajax's management emphasized their execution is proceeding as planned and the company's book value is expected to remain stable or potentially increase. Furthermore, they set a goal to grow earnings sufficiently to cover the company's dividend within the next year. Looking ahead, the management team is also seeking a significant deal that could transform the company, although the specifics of such a deal, including its timing and scale, remain uncertain.

Great Ajax operates within the comprehensive commercial real estate (CRE) ecosystem, which includes various types of transactions such as discounted loan portfolio deals, direct originations, and entity-level transactions. The management indicated that any potential capital raises would be directly linked to investment opportunities that are expected to be accretive to earnings.

BTIG's report also mentioned Rithm Capital Corp. (NYSE: RITM), highlighting its track record of making opportunistic investments, which could bode well for Great Ajax's future endeavors. While there were concerns about the possibility of near-term dilution, the management's commitment to strategic capital raising was noted to mitigate such risks.

The financial firm concluded that their estimates for Great Ajax are currently under review following these discussions. This suggests that the firm may adjust its outlook on the company based on further analysis of the information presented during the investor meetings.

In other recent news, Great Ajax Corp has been making significant strides in its strategic shift towards the commercial real estate market. The company recently completed the sale of a substantial portion of its residential loan portfolio and reinvested approximately $25 million into AAA-rated commercial mortgage-backed securities (CMBS) notes. This move was facilitated by a major transaction with Rithm Capital, which also became the external manager and acquired $14 million of Great Ajax stock.

Great Ajax anticipates further divestment of its residential loan book by the end of 2024, with the proceeds expected to be reinvested into additional CMBS investments and later into commercial mortgage loans. Despite a GAAP net loss of $12.7 million reported in Q2 2024, primarily due to mark-to-market and realized losses on mortgage loan sales, the company remains confident in the potential of the commercial real estate market.

BTIG has maintained its Neutral rating for Great Ajax, citing the need for further clarity on the timeline for residential loan sales and joint venture investments, among other factors. The company also declared a common stock dividend of $0.06 per share and is currently selling approximately $120 million of legacy residential assets. As part of its new strategic direction, Great Ajax plans to explore potential mergers and acquisitions and the acquisition of distressed assets.

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