Ladenburg Thalmann Initiates Triplepoint Venture With Buy, $13.25 Price Target

Ladenburg Thalmann has started TriplePoint Venture Growth BDC CorpTPVG with a Buy rating and $13.25 price target, saying the firm's target markets are "growing to meet greater demand for new technologies and services," thereby providing significant opportunities for experienced venture lenders such as TriplePoint Venture.

Menlo Park, California-based TriplePoint Venture makes secured loans to development-stage companies in technology, life sciences and other high-growth industries.

Recent Performance

Citing a Dow Jones VentureSource report, analyst Casey Alexander said about $72 billion were invested through venture capital in the United States over the past year, "a small fraction of that consisting of venture lending."

According to the note from Alexander, the data from Dow Jones VentureSource also showed that "more than 50 percent of all VC-backed equity financings were in later-stage companies, where 'Venture Growth Stage' opportunities for TriplePoint would naturally be located." About $46 billion of the $72 billion were in later-stage transactions.

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"This was the largest single year for later-stage transactions on record. Thus, the opportunity for 'Venture Growth Stage' investing is robust, in our view," Alexander elaborated.

The analyst also noted that venture debt "poses a potentially more attractive risk/reward profile than venture equity." Alexander added that the business model of TriplePoint Venture enables it to "reap the attractive return of venture debt while its loan structuring process limits the risk associated with development-stage lending."

As of the end of fourth-quarter 2015, TriplePoint Venture's committed backlog, consisting of contractual unfunded loan commitments, increased to $190 million.

In March 2016, TriplePoint Venture announced the sixth consecutive quarterly dividend of $0.36 per share through April 2016. The current yield of 13.6 percent, "which is considerably higher than the BDC group mean current yield of 11.8 percent."

Looking Forward

Meanwhile, Alexander sees "relatively steady portfolio growth" for 2016 of $10 million per quarter to $311 million by year end. The analyst estimates that TriplePoint Venture will earn NII of $0.34 per share in the first quarter, in line with the FactSet consensus estimate and slightly below the current dividend (quarterly pay, $0.36 per quarter). The analyst expects FY2016 NII per share at $1.45.

In addition, the analyst projects NAV at 2016 year-end will be relatively stable at $14.22 per share.

"[W]e contend there is significant enough potential total return to initiate coverage of TPVG with a Buy rating given that TPVG currently trades at a (26 percent) discount to current NAV. Including dividends, our 12-month price target for TPVG implies a potential total return of ~39 percent," Alexander added.