Ares Commercial Real Estate Corp (NYSE: ACRE)

Sector: Real Estate Industry: REIT - Mortgage CIK: 0001529377
Market Cap 262.93 Mn
P/B 0.50
P/E -34.14
P/S 4.45
ROIC (Qtr) 1.21
Div Yield % 14.64
Rev 1y % (Qtr) -15.30
Total Debt (Qtr) 809.89 Mn
Debt/Equity (Qtr) 1.55

About

Ares Commercial Real Estate Corp, or ACRE, is a specialty finance company that operates in the commercial real estate (CRE) sector. It is externally managed by Ares Commercial Real Estate Management LLC, a subsidiary of Ares Management Corporation, a leading global alternative asset manager. ACRE's primary business activities involve the origination and investment in CRE loans and related investments. The company's operations span various geographic regions, with a focus on direct origination and customized financing solutions. ACRE generates revenue...

Read more

Price action

Investment thesis

Bull case

  • Robust free cash flow of 22.11M exceeds capital expenditure of 1.69M by 13.10x, indicating strong organic growth funding capability.
  • Strong operating cash flow of 23.80M provides 1.78x coverage of SG&A expenses 13.38M, showing efficient operational cost management.
  • Operating cash flow of 23.80M provides strong 2.38x coverage of operating expenses 9.99M, showing operational efficiency.
  • Strong free cash flow of 22.11M provides 1.65x coverage of SG&A expenses 13.38M, indicating efficient cost management.
  • Operating cash flow of 23.80M provides strong 14.10x coverage of capital expenditure 1.69M, enabling organic growth.

Bear case

  • Operating cash flow of 23.80M barely covers its investment activities of 610.86M, with a coverage ratio of 0.04, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 23.80M provides thin coverage of dividend payments of (44.45M) with a -0.54 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Operating earnings of (7.44M) show weak coverage of depreciation charges of 8.75M, with a -0.85 ratio indicating high capital intensity and potential reinvestment needs.
  • Free cash flow of 22.11M represents just -0.04x of debt issuance (535.01M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • R&D investment of 0 represents just 0x of SG&A expenses of 13.38M, indicating potential underinvestment in innovation relative to administrative overhead.

Peer comparison

Companies in the REIT - Mortgage
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 NLY Annaly Capital Management Inc 13.57 Bn 10.12 7.94 107.02 Bn
2 AGNC AGNC Investment Corp. 11.33 Bn 16.49 30.46 95.01 Bn
3 STWD Starwood Property Trust, Inc. 6.34 Bn 17.32 3.51 21.43 Bn
4 RITM Rithm Capital Corp. 5.69 Bn 7.32 1.14 34.97 Bn
5 BXMT Blackstone Mortgage Trust, Inc. 3.26 Bn 30.37 6.41 15.46 Bn
6 ARR Armour Residential REIT, Inc. 1.84 Bn 35.07 15.78 16.56 Bn
7 DX Dynex Capital Inc 1.60 Bn 9.10 6.93 11.75 Bn
8 ABR Arbor Realty Trust Inc 1.50 Bn 9.82 2.84 10.40 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.76 0.83
EV to Cash from Ops. EV/CFO 44.41 -102.96
EV to Debt EV to Debt 1.31 1.31
EV to EBIT EV/EBIT -142.11 -260.73
EV to EBITDA EV/EBITDA 41.77 -16.37
EV to Free Cash Flow [EV/FCF] EV/FCF 47.80 3.47
EV to Market Cap EV to Market Cap 4.02 9.18
EV to Revenue EV/Rev 17.88 26.77
Price to Book Value [P/B] P/B 0.50 0.68
Price to Earnings [P/E] P/E -34.14 -4.85
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) -0.17 -0.55
Dividend Payout Ratio % Div Payout % (Qtr) -500.00 29.47
Dividend per Basic Share Div per Share (Qtr) 0.70 1.15
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 173.70 57.60
Interest Coverage Int. cover (Qtr) 0.00 -0.17
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 0.00 37.60
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 71.22 24.22
Dividend Growth (1y) % Div 1y % (Qtr) -35.19 4.53
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 87.92 17.83
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -32.80 9.86
EBIT Growth (1y) % EBIT 1y % (Qtr) 88.35 20.98
EBT Growth (1y) % EBT 1y % (Qtr) 88.35 11.17
EPS Growth (1y) % EPS 1y % (Qtr) 88.14 59.25
FCF Growth (1y) % FCF 1y % (Qtr) -42.66 59.63
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -33.71 20.65
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.04 0.04
Cash Payout Ratio Cash Payout (Qtr) 1.74 0.83
Cash Ratio Cash Ratio 0.00 0.00
Current Ratio Current Ratio 0.00 0.00
Debt to Equity Ratio Debt/Equity (Qtr) 1.55 5.05
Interest Cover Ratio Int Coverage (Qtr) 0.00 -0.17
Times Interest Earned Times Interest Earned (Qtr) 0.00 -0.17
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 2.20 137.11
EBIT Margin % EBIT Margin % (Qtr) -12.58 142.19
EBT Margin % EBT Margin % (Qtr) -12.58 129.16
Gross Margin % Gross Margin % (Qtr) 67.50 117.97
Net Profit Margin % Net Margin % (Qtr) -13.00 125.89