Shares of Nara Bancorp Inc. recovered slightly Friday, when it received upgrades from two analysts who said the stock's sharp drop Thursday presented a buying opportunity.
The stock fell nearly 20% on March 31, a day after the $1.5 billion-asset Los Angeles company, which caters to Korean-Americans, revealed in a filing with the Securities and Exchange Commission that it had been forced to restate its 2002 results.
Its auditor had found Nara improperly accounted for a $600,000 compensation package for its now-retired president and chief executive officer, Benjamin Hong, according to the filing. The package was meant to pay for Mr. Hong's country club dues and auto expenses, as well as for certain work he was supposed to perform after his retirement.
On Friday, Brett D. Rabatin, an analyst at First Horizon National Corp.'s FTN Midwest Securities Corp., raised his rating for Nara's shares to "buy," from "neutral," but cut his 12-month target price by $3 a share, to $20. He wrote in a research note that the "headline risk" for Nara is "overdone."
Don Worthington, a Hoefer & Arnett Inc. analyst, also upgraded Nara's stock to "buy," from "neutral," and agreed with Mr. Rabatin's assessment of last week's stock decline.
The price weakness presents a good opportunity to purchase shares, Mr. Worthington wrote in a note. Despite Nara's recent woes, "the longer-term outlook for the company remains strong for both balance-sheet and earnings growth."
According to the SEC filing, Mr. Hong was asked to resign from the board March 25. Nara has also "reassigned" Timothy Chang, its chief financial officer to "other duties" that will not involve "the preparation of the company's periodic reports, press releases, or financial statements," the filing said.
Christine Oh was appointed the acting chief financial officer; she is currently its controller, Nara said.
Also, Nara has delayed the filing its 2004 annual report until sometime this month. Its Nasdaq stock trading symbol, "NARA," will be changed to "NARAE," to reflect the missed deadline.
Despite their upgrades, both Mr. Rabatin and Mr. Worthington said that Nara's issues are real, and that investors should take note.
The accounting adjustment was minor (Nara reduced its 2002 diluted earnings per share by just a penny, to 66 cents), but Mr. Worthington wrote in his report that the circumstances surrounding the compensation arrangement, the lack of internal review and analysis, and inadequate disclosures "are all troublesome issues."
Mr. Rabatin expressed concern that more issues might surface when Nara sends its 10-K filing to the SEC.
Two analysts downgraded Nara's stock Thursday. Joseph Gladue of Cohen Bros. Securities LLC lowered his rating to "hold," from "buy." Michael P. McMahon of Sandler O'Neill & Partners LP who downgraded the stock to "sell," from "hold," and cut his 12-month price target by $5 a share, to $14.
Mr. Gladue wrote in a research note that even though Nara's earnings restatement and the firing of its chief executive are isolated events, the disruptions "will likely divert management's attention from the business and create uncertainty," which is always "a negative from an investor standpoint."
A Nara spokeswoman did not return phone calls seeking comment. Its stock has fallen roughly 33% so far this year; as of late afternoon Friday it had risen 5% for the day.
