Morgan Keegan: TRMK Pullback Provides "An Attractive Entry Point"

Morgan Keegan said that it believes the recent pullback on Trustmark Corporation TRMK “provides an attractive entry point for investors in what we consider to be a low-risk, high-performing franchise, with TRMK down 8.2% YTD versus a 1.6% increase in the KBW Bank index.”

“The pullback follows a 16% rise in TRMK, inline with the BKX, during Dec 2010,” Morgan Keegan writes. “At 12.0x our 2012 EPS estimate shares trade at a 16% discount to the 14.3x median of the MK small-cap banks. On a P/TBV basis TRMK trades at 1.7x, inline with the peer median. Our 12-month price target of $27 implies a multiple of 14x our 2012 EPS estimate and 2.0x YE11 TBV.

“In our view, TRMK warrants an above average valuation multiple given its solid balance sheet position, strong pre-tax pre-provision earnings (4Q12 PTPP/Assets of 2.3% versus 1.8% median of MK coverage universe) and the below average credit risk that we see here. Additionally the stock offers an extremely attractive 4%+ dividend yield, more than 3x the 1.2% median of MK Small-Cap peers.”

Trustmark Corporation closed Thursday at $22.81.