Deutsche Bank Initiates Coverage On Fifth Street Asset Management

Deutsche Bank initiated coverage on Fifth Street Asset Management Inc FSAM with a Buy rating and $17 price target.

According to analyst Stephen Laws, “FSAM manages permanent capital vehicles, private funds and a credit focused hedge fund and generates income from base management fees, incentive fees, and performance fees.

“We are initiating coverage with a Buy, as we expect earnings to grow as AUM increases and expect FSAM to benefit from an attractive market opportunity to make new investments. We are establishing a target of $17/sh, which is based on 12x our 2015 adjusted earnings estimate.”

Laws expected “FSAM to benefit from roughly $1.3 trillion of leveraged loans and high yield bonds scheduled to mature by 2021 and reduced lending from traditional banks. We expect demand to outpace supply as active lenders in the sector benefit from less competition while traditional lenders are constrained given the regulatory environment and legacy investments.”

The analyst report noted that an “economic downturn could negatively impact FSAM’s permanent capital vehicles and private funds. The inability to raise capital from investors to increase AUM will have a negative effect on the company’s projected growth.”

Fifth Street Asset Management recently traded at $14.94, up 1.22 percent.