Analyst: Fifth Street Asset Management Inc. To Gain As Trad Banks Pull In Horns

Fifth Street Asset Management Inc.

should see strong growth in its assets under management as traditional banks pull back from lending, an analyst said Monday. The Greenwich, Conn.-based asset manager provides financing to companies with revenue between $25 million and $500 million. Fifth Street closed Monday at $14.91, up 1 percent. Shares are down more than 11 percent since going public Oct. 30. Deutsche Bank's Stephen Laws put a Buy rating and $17 target on the company, joining a raft of analysts launching coverage of Fifth Street Monday. The coverage follows the expiration of Fifth Street's so-called quiet period which prohibit analysts who are lead and co-lead underwriters from issuing reports immediately following an IPO. Fifth Street raised $102 million in its stock offering. Earlier this month, Fifth Street also obtained a a $176 million, five-year revolving credit facility and currently has nearly $6 billion of assets under management. Citing an overall finance market with $1.3 trillion in loans and high-yield bonds slated for maturity by 2021, as well as lower lending by traditional banks, Laws expects a "supply-demand imbalance" for corporate financing. Credit Suisse's Craig Siegenthaler launched coverage with a Buy rating and $18 target, pointing to the company's plans to distribute up to 90 percent of its after-tax earnings as dividends. Siegenthaler predicted annual earnings growth through 2016 of between 50 percent and 60 percent. Because 80 percent of the company's loans are based on floating rates, Siegenthaler said the company is "well positioned" for an expected increase in prevailing interest rates. Other companies launching coverage on Fifth Street Monday included Goldman Sachs, with a Neutral rating and $18 target, RBC with an Out Perform rating and $19 target and JP Morgan at Over Weight and a $20 target.