Qualitas is a real estate fund manager overseeing a series of funds on behalf of sovereign wealth funds, private banks and pension funds. The funds invest predominantly in senior debt to residential real estate developers.

Morgans notes real estate credit delivers a better risk-adjusted return than is currently available for comparable equity investments and initiates coverage with an Add rating and $2.75 target. Currently Qualitas has $5.8bn in funds under management (FUM).

The analyst points out Qualitas' longer term growth potential has increased as regulated deposit taking institutions (ADIs) have retreated from real estate development finance. ADI's are required to hold more capital against their riskier development finance loans.

Australia has under-built on multi-unit residential real estate development since the GFC, and the broker's positive view on this sector underpins its Add thesis.

Sector: Real Estate.

Target price is $2.75.Current Price is $2.46. Difference: $0.29 - (brackets indicate current price is over target). If QAL meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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