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KBW's 4 Takeaways From Meeting With Houlihan Lokey Management

KBW's 4 Takeaways From Meeting With Houlihan Lokey Management

Keefe, Bruyette & Woods believes Houlihan Lokey Inc (NYSE: HLI) stands to gain from M&A volume recovery, stable financial advisory services and strong restructuring franchise. The comments come after a meeting with CEO Scott Beiser and Chief Financial Officer Lindsey Alley last week.

Analyst Ann Dai reiterated its Outperform rating with a target price of $28 on the company's shares. The brokerage also listed four key takeaways from the meeting.

Key Points

1. Middle-market M&A level activity: The brokerage believes Houlihan Lokey has enough liquidity to fund this segment, although some business development companies are struggling to raise fresh equity capital.

2. The company would not be impacted by the proposed regulations in respect of mega deals from the middle-market. KBW thinks the fresh regulation could play a spoil sport only in the case of complex deals though deal volume could take a hit during a period of crisis.

Related Link: Reminder: Houlihan Lokey Goes Ex-Dividend Soon

3. Restructuring: It contributes about 30 percent of revenues. Dai thinks the stock is more defensive, citing the strong restructuring franchise apart from stable revenues from its financial advisory services.

4. Business model ensures flexible cash deployment. "In addition to paying the dividend and partially funding acquisitions with cash, we believe that management is open to issuing special dividends if they believe excess cash levels have built up beyond what they need to run the business and they see limited opportunities to put the money to work accretively," the brokerage viewed in a research note.

At time of writing, the stock traded at $24.29, shedding $0.09, or 0.37 percent.

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Latest Ratings for HLI

Jan 2020MaintainsBuy
Nov 2019Initiates Coverage OnEqual-Weight
Nov 2019Initiates Coverage OnEqual-Weight

View More Analyst Ratings for HLI
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