800-742-7730     This email address is being protected from spambots. You need JavaScript enabled to view it.     Offices     News     Family of Companies

NHLD logo
NAM Logo
NationalInsurance Logo
vfin logo
GC logo

Garrison Capital Inc. - Initiation Note

Garrison Capital Inc.

BUY (GARS, $14.53)

Good Growth Potential and Asset Quality With Room to Expand - Initiating With A Buy Rating And $17 Price Target.

February 4, 2015

Christopher R. Testa

212.417.7447

This email address is being protected from spambots. You need JavaScript enabled to view it.


Investment Conclusion. We are initiating coverage of Garrison Capital Inc. (GARS) with a BUY rating and $17 price target. We think that Garrison has significant potential to deliver a substantial increase in net investment income (NII) per share growth over the next two years. Garrison has a low cost of funds with an effective cost of debt of 3.31% as of 3Q14. The company is a unique BDC with 9.1% of the portfolio in consumer loans and 2.3% in real estate loans. The diversified asset mix has permitted the company to maintain higher effective yields in an increasingly competitive environment in the leveraged loan space. The company is in the process of obtaining a SBIC (Small Business Investment Company) license and we estimate the company will begin to issue SBA (Small Business Administration) debentures in 3Q15. Combined with the additional borrowing capacity that this BDC has available and ability to issue equity in an accretive and opportunistic manner these tailwinds make us confident in our estimates for strong portfolio growth of 22.9% in 2015 and 20.4% in 2016 with anticipated dividend increases in both years. Our $17 price target implies an estimated 2016 P/ NII of 10.3x, dividend yield of 8.2%, and P/NAV of 1.1x compared to the BDC sector averages of 8.9x, 10.7%, and 0.92x, respectively.

GARSSource: S&P Capital IQ, National Securities Corporation Estimates

Garrison will maintain high effective yields and net interest margin (NIM) through asset mix and low cost of funds, in our opinion. Garrison’s NIM has trended up steadily until 3Q14 when it declined slightly by 8 bps. The company’s cost of debt has steadily declined from 4.3% in 1Q13 to 3.3% in 3Q14 with effective yields rising from 7.8% to 11.5% over this same time period. In 3Q14 first lien was 78.8% of the portfolio which is down significantly from 95.2% of the portfolio in 1Q13. The company


Request Document


Important Disclosures

This publication does not constitute and should not be construed as an offer or the solicitation of any transaction to buy or sell any securities or any instruments or any derivatives of the securities mentioned herein, or to participate in any particular trading strategies. Although the information contained herein has been obtained from recognized services, and sources believed to be reliable, its accuracy or completeness cannot be guaranteed. Opinions, estimates or projections expressed in this report may make assumptions regarding economic, industry, company and political considerations, and constitute current opinions, at the time of issuance, which are subject to change without notice.

This report is being furnished for informational purposes only, and on the condition that it will not form a primary basis for any investment decision. Any recommendation(s) contained in this report is/are not intended to be, nor should it / they construed or inferred to be, investment advice, as such investments may not be suitable for all investors. When preparing this report, no consideration to one’s investment objectives, risk tolerance and other individual factors was given; as such, as with all investments, purchase or sale of any securities mentioned herein may not be suitable for all investors. By virtue of this publication, neither the Firm nor any of its employees shall be responsible for any investment decisions. Before committing funds to ANY investment, an investor should seek professional advice. Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice, or to be used by anyone to provide tax advice. Investors are urged to consult an independent tax professional for advice concerning their particular circumstances. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, either expressed or implied, is made regarding future performance.

National Securities Corporation (NSC) and its affiliated companies, shareholders, officers, directors and / or employees (including persons involved with the preparation or issuance of this report) may, from time to time, have long or short positions in, and buy or sell the securities or derivatives (including options) thereof, of the companies mentioned herein. One or more directors, officers, and / or employees of NSC and its affiliated companies, or independent contractors affiliated with NSC may be a director of the issuer of the securities mentioned herein. NSC and / or its affiliated companies may have managed or co-managed a public offering of, or acted as initial purchaser or placement agent for a private placement of any of the securities of any issuer mentioned in this report within the last three (3) years, or may, from time to time, perform investment banking or other services for, or solicit investment banking business from any company mentioned in this report.

This research may be distributed by affiliated entities of National Securities Corporation (NSC). Affiliated entities of NSC may include, but are not limited to, vFinance Investments, Inc., National Asset Management and other subsidiaries of our parent company, National Holdings Corporation.

The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and the income they produce if any, may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors. Furthermore, NSC may follow emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. This report does not take into account the particular investment objectives, financial situation or needs of individual investors. Before acting on any advice or recommendation in this material, the investor should exercise independent judgment as to whether it is suitable in light of his/her particular circumstances and, if necessary, seek professional advice. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance.

Additional information relative to securities, other financial products, or issuers discussed in this report is available upon request. Neither this entire report, nor any part thereof, may be reproduced, copied or duplicated in any form or by any means without the prior written consent of National Securities Corporation. All rights reserved. NSC is a member of both the Financial Industry Regulatory Authority (FINRA) and the Securities Investors Protection Corporation (SIPC).

For disclosures inquiries, please call us at 1-800-417-8000 and ask for your NSC representative, or write us at National Securities Corporation, Attn. Supervision Department, 410 Park Avenue, 14th Floor, New York, NY 10022, or visit our website at www.nationalsecurities.com

NHLD logo
NAM Logo
NationalInsurance Logo
vfin logo
GC logo

Newsletter Sign Up

News letter