Roth Capital Sees Growth Potential In GWG Holdings

Roth Capital Partners on Friday issued a company note on GWG Holdings Inc GWGH, a life insurance settlement company. Roth initiated coverage of GWG Holdings with a Buy rating and a 12-month price target of $10.

Analyst William Gibson wrote, "In our opinion, GWG Holdings is positioned to become the leader and low-cost competitor in the largely untapped market for life insurance settlements. We believe the backdrop is particularly constructive with aging baby boomers tapping this resource."

The stock recently traded at $6.58, down more than 3 percent on the day.

There are four primary reasons why Roth Capital Partners views GWG positively:

• The company creates attractive investments by selling income-oriented bonds and preferred stock.
• The life insurance settlement market is highly regulated, thus reducing the risk for their securities and business operations.
• Company has built a developed network of brokers and financial advisors to sell its products.
• Management has proven track record of excellence in the financial and insurance industries.

Roth Capital Partners believes that GWG Holdings is poised to take advantage of low financing costs and self-funded portfolio growth which have the potential to result in stable and predictable earnings and cash flow. For example, the spread between the company's anticipated yield of 11.07 percent and its weighted cost of capital of 6.96 percent will help fund the company. The company's portfolio includes 343 policies which going forward the company hopes to continue to grow through their network of brokers and achieve economies of scale in the life insurance settlement industry.