FBR Capital Downgrades Emergent Capital (EMG) to Market Perform on 'Going Concern' Addition
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FBR Capital downgraded Emergent Capital (NYSE: EMG) from Outperform to Market Perform with a price target of $2.00 (from $4.00) after the company added 'going concern' language in its 10-Q.
Analyst Bob Ramsey commented, "We downgrade shares of Emergent Capital to Market Perform (from Outperform) and cut our price target to $2 (from $4), equal to 0.3x tangible book, to reflect mounting liquidity challenges. With less than 4.5 months of cash on hand, we consider its outlook very binary. It will likely either (1) find a buyer—in this scenario we estimate a value around $4, or 70% of estimated forward TBV. EMG could also sell its insurance policies, but the cost to terminate its credit facilities would be steep, or (2) absent a buyer, EMG would have to recapitalize, largely wiping out existing common shareholders. Our $2 price target reflects the midpoint of these two values, given a lack of real insight into the likelihood of a sale, although the incremental signs of stress (issuing stock at depressed levels, 10-Q going concern language, discussion of letting insurance policies lapse, and the protracted period of time to explore alternatives) does not give us comfort."
Shares of Emergent Capital closed at $1.90 yesterday.
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