On Friday, BTIG initiated coverage on Franklin BSP Realty Trust (NYSE:FBRT) with a Buy rating and set a price target of $16.00. The firm highlighted the strength of the company in the current economic climate, noting its performance and positioning in the commercial mortgage real estate investment trust (cmREIT) sector.
Franklin BSP Realty Trust, which focuses on originating senior mortgage loans, is managed by Benefit Street Partners, a subsidiary of Franklin Templeton.
Despite the company's relatively short time in the market compared to its peers, it has shown robust activity, with $591 million in new loan commitments in the first quarter of 2024. This figure represents the highest level within BTIG's coverage universe and a significant increase from the first quarter of 2023.
The analyst pointed out that Franklin BSP Realty Trust's originations in the first quarter of 2024 have set it apart from many competitors, who have not seen as much activity.
The company's substantial involvement in the multifamily sector, which constitutes 75% of its portfolio, has not yet negatively influenced its operations, despite concerns from some investors.
The firm also commended Franklin BSP Realty Trust for its solid fundamentals, including its lower-than-average leverage ratio of 2.5 times compared to the coverage average of 2.9 times.
Additionally, the company's low Current Expected Credit Losses (CECL) at 2.9% of equity and minimal office exposure at 6% versus the 24% average are seen as favorable factors for its stock performance for the remainder of 2024.
The Buy rating and the $16 price target suggest a potential one-year forward total return of 28.0% for Franklin BSP Realty Trust, which includes the benefit of the current 10.4% dividend yield. BTIG's coverage resumption reflects optimism about the company's prospects in navigating the macroeconomic environment and capitalizing on new loan originations.
In other recent news, Franklin BSP Realty Trust (FBRT) reported an increase in distributable earnings per fully converted share from $0.39 to $0.41 in Q1 2024. This growth was accompanied by an expansion of the company's core portfolio, which reached $5.2 billion, largely due to strong origination activity in the multifamily sector.
Despite facing market challenges such as rising borrowing costs and softer asset values, FBRT remains confident in the resilience of its multifamily-focused portfolio.
The company repurchased $3.8 million of its common stock in the first quarter and is actively originating new loans and securitizing them, expecting conduit revenue to contribute to earnings.
FBRT plans to finalize the sale of certain assets in the second quarter and is optimistic about future growth potential. The company has over $200 million in cash to spend and is considering raising dividends in the future after addressing its legacy portfolio.
InvestingPro Insights
Franklin BSP Realty Trust's commitment to shareholder returns is evident through its significant dividend, which currently stands at a yield of 10.37%. Analysts have recognized this and predict the company will maintain profitability this year, a continuation of its profitable performance over the last twelve months. These InvestingPro Tips align with BTIG's positive outlook on the company's financial health and its ability to navigate the current economic landscape.
Key financial metrics from InvestingPro also support the company's robust standing. With a market capitalization of $1.12 billion and a P/E ratio of 10.23, Franklin BSP Realty Trust demonstrates a balance of size and earnings potential. The company's revenue growth over the last twelve months has been impressive at 18.95%, reflecting its strong operational performance. Additionally, the company's solid gross profit margin of 99.51% indicates efficient management of its finances.
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