Summary 

The company's CEO believes the shares are substantially undervalued. 

It pays out most of its earnings to shareholders as a REIT. 

Current yield is 10%. 

Long-time readers of this site will recognize Manhattan Bridge Capital (NASDAQ:LOAN) as a name that has been brought up here many times. This first-lien (up to 65% of collateral value) real-estate lender traded at a fraction of book value just a few years ago. Since then, the company's shares have catapulted upwards, and now trade at a premium to book. The company recently became a REIT, and as such it now pays out most of its income to shareholders, and currently yields over 10%! I recently spoke with the company's CEO, Assaf Ran, and got his thoughts on where the company goes from here.

Me: What are your thoughts on the "efficiency" of the market in how its view of your company has changed? Has your opinion of the per-share intrinsic value of the company changed as much as the share price has?

Ran: When we started this line of business, almost eight years ago, we faced doubts in the marketplace relating to our ability to underwrite, manage and control a portfolio of "Hard Money Loans". Therefore, the market expected us to experience write offs and defaults, and evaluated us below book. During the years we have demonstrated unprecedented performance, experienced no defaults and had no write offs or write downs whatsoever. In addition we have managed to consistently grow revenue and net earnings, and that allowed a constant increase in cash dividends to shareholders. Further, we managed to increase leverage, while still being considered a low leveraged lender.

Saj: What do you think is the best way for investors to value Manhattan Bridge Capital? (e.g. P/B, P/E, something else? what multiple seems appropriate to you, if applicable?)

Ran: I believe that we are undervalued. Given our track record, the quality of our loans and our leverage ratio, I believe that we should be valued at 5% yield -- $5.60 Stock price x 5% = $0.28.

(The current share price is $2.74)