Citigroup Reiterates Buy Rating on Och-Ziff Capital Management (OZM)

Citigroup is out with a research report this morning, where it reiterates its Buy rating on shares of Och-Ziff Capital Management

; it has a $22.00 price target on the stock. The Citi analysts, “Late 6/29, the Senate stripped out the controversial $19B bank assessment in an effort to garner the requisite 60 votes necessary to pass the Financial Reform bill. Instead, the Senate will seek to raise bank deposit premium and TARP funds to finance the legislation. We view this replacement as a tactical positive for alternative managers, most notably OZM among our coverage universe.” They noted, “Under prior bill form, banks + HFs with $10B+ in AUM would have paid for the assessment though details were uncertain around who and how much the respective companies would have to fund. Given OZM' PTP structure, such a penalty would have been dilutive. Such a shift removes this risk.” They also said, “Though the Tax Extenders bill was defeated in Senate earlier this week, there is talk that carried interest taxation might get revisited either after congressional recess and post mid-term elections; though potential Republican gains could further lower probability of passage and/or incremental legislation may not be as onerous as recent mark-ups. Nonetheless, our valuation work already discounts immediate passage, which seems increasingly onerous. Our understanding is that current tax discussion would have up to 10-year grandfathering, allowing for significant time for adoption. Relaxing our immediate 30% carried interest tax rate pushes our target closer to $25, all else equal. OZM remains a top pick, and we would use recent weakness to bolster/add to positions.”