Doral: Robust In San Juan

By Gene G. Marcial

Raising the Roof
Puerto Rico is a place not only for sun but also for stock winners. So says Donald Gimbel of investment bank Carret, which has accumulated shares of San Juan's Doral Financial (DRL ).

Among Puerto Rican banks, Doral is No. 4 in assets but No. 1 in home mortgage originations. A chronic housing shortage on the island during a strong economy is fueling steady demand for mortgages. Doral's stock climbed from 26 last August to 38 in early April -- before investor fears of a rise in interest rates pulled it down to 32.74 "This is a chance to buy before the stock resumes its upward spiral, driven by Doral's dynamic 30% growth," says Gimbel. He argues that even if rates edge higher, Doral's growth won't wilt. He sees the stock hitting 60 in a year. The stock is cheap, he says -- at 8.8 times projected 2004 earnings and 7.5 times 2005 estimates. Audrey Snell of Brean Murray, which has done banking for Doral, rates the stock a buy and expects it will earn $3.65 a share in 2004 and $4.25 in 2005, up from $2.72 in 2003. Doral posted record first-quarter results in all sectors of its banking business. Snell expects all of them to continue to accelerate. Like Gimbel, she believes that the brisk demand for homes should continue. Any hike in rates will be offset by the housing shortage, she says.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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