Regional Bank Bet on Mississippi

05/17/2016 7:00 am EST

Focus: STOCKS

Peter Mantas

CIO, Logos LP

Value investing expert Peter Mantas, a Canadian money manager with Logos LP, looks "south of the border" to the US to find an attractive regional bank.

Renasant Corp. (RNST) is a regional bank operating in Mississippi that is successfully taking advantage of both a unique resurgence in the state as well as in the American South.

The company recently closed the acquisition of KeyWorth Bank to expand its presence in Georgia and is looking to drastically enhance its wealth management footprint within the southern US.

The real story, however, is two fold; the possibility that RNST is a proxy for an improving southern US as well as RNST's ability to capture market share within its core divisions.

Mississippi has become a 'new economy' as traditional industries have given way to new markets within the state, creating a plethora of opportunity for business expansion.

Gone are the days of natural resource and government as the major drivers of employment and in are the days of new professional services, business services, health care and information. 

Moreover, unemployment in certain regions within the state are dropping to record lows while the annual percent change of incomes within the state is growing faster than the national level.

Renasant has been a prudent allocator of capital. The company has a very healthy ROE near 8% while increasing book value per share by 25% over the last three years.

Over the past 5 years, operating cash flow has more than doubled while operating income year-over-year has increased by 36.58%, which is very strong for a regional bank.

Revenue growth over the last quarter has increased by over 47% and the 10-year average of revenue growth has surpassed 11%, which reflects the quality and prudence of management as it has been able to weather the financial crisis in a sustainable fashion.

The more impressive metric, however, has been the bank's cash flow from sales which is at a remarkable 65.06%, which is almost double from last year.

Prudent and competent management, strong economic growth, low loan loss provisions, increasing cash flows and operating income combined with growing ROE should propel RNST towards becoming a financial institution worth north of $2 billion in market capitalization. 

Overall, we believe RNST below $30 creates a unique opportunity to participate in a growing regional bank in a very unique economic situation.

Subscribe to LogosLP here.

By Peter Mantas, Money Manager with Logos LP

 More from MoneyShow.com:

BB&T: A Regional Favorite

Wells Fargo: A Slam Dunk?

Turnaround Expert's Banking Bets

Related Articles on STOCKS