Oppenheimer: Saddle Up A Position In WhiteHorse Finance

WhiteHorse Finance Inc WHF reported a 3Q profit on November 7.

The Analyst

Oppenheimer's Chris Kotowski initiated coverage of WhiteHorse Finance with an Outperform and $15 price target.

The Thesis

Whitehorse is a high-quality business development company that has been able to generate assets with yields above industry average and with minimal realized losses, Kotowski said in a Thursday note. (See Kotowski's track record here.) 

The company has enough liquidity to grow its portfolio and outearn its dividend by a few cents per quarter, Kotowski said. Whitehorse will cover its dividend distribution by the second quarter of 2018, he said. 

In calculating the price target, Kotowski applied a 5-percent premium over business development companies for WhiteHorse Finance due to its excellent long term credit performance.

The biggest risk for the company is credit quality., Kostowski said. If interest rates were to rise, portfolio value could be adversely impacted and a recessionary environment would lead to credit deterioration, the analyst said. 

The Price Action

The stock gapped up Thursday and it is trading around 1 percent higher at $14.07.