Wells Fargo analyst Finian O'Shea resumed his coverage on Barings BDC Inc. with an "outperform" rating and a price target of $11.
O'Shea said the current discount of Barings BDC's shares to net asset value will disappear in the near term as the company works to boost its earnings and produces quality originations. Wells Fargo analysts see Barings BDC as a high quality asset manager, which affords benefits to the business development industry.
Wells Fargo analysts also think Barings BDC's shares will trade at a premium in the future as they believe the company will be part of a wave of new managers that promote strong corporate governance. They cite the company's shareholder-oriented policies and MassMutual's $150 million investment in Barings BDC, which means any wrongdoing by the management will not sit well for the greater franchise. The analysts also said Barings BDC's board and management can be replaced if the company's performance declines, as they do not materially own the company.
The analysts also said Barings BDC can lend as it has an "industry-leading" fee structure that allows the company to take on lower-spread assets and earn the same market return, which means higher risk-adjusted returns.