Stephen Ryan
Special situations, value, long/short equity

Hannon Armstrong: Transition To Balance Sheet Financing Should Provide 20% Upside, 7.3% Yield

Investment Thesis

I view Hannon Armstrong (NYSE:HASI) as a strong fundamental growth play with a risk adjusted yield comparable to that of an AAA (or equivalent) bond. Over the next four quarters (ending in Q2 2014) I believe Hannon Armstrong will grow its book 27%, and add $455 million to "investments in financing receivables" as a direct result of its post-IPO business plan. My BV forecast estimates that HASI has the ability to add $1.30 to its balance sheet for every $1.00 of equity/debt, which should increase the company's book to $550-$575 in tangible assets, and around $745-$752 in; "investments in financing receivables, and; on-balance sheet "securitization assets."

Second quarter results exhibited the origination and accretive...

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