THL Credit (NASDAQ:TCRD) had its price target reduced by National Securities from $9.00 to $8.00 in a report issued on Monday morning. They currently have a neutral rating on the investment management company’s stock.
“▪ THL’s NAV/share declined to $9.15 from $10.10 Q/Q and $10.51 Y/Y. The company had $6.4mm of net realized gains versus unrealized depreciation of $36.7mm in 4Q18. Charming Charlie and LAI accounted for over 60% of the quarterly NAV decline and Charming Charlie had its term loans placed on non-accrual status.
▪ Charming Charlie had a liquidity crunch for the 12/31/18 quarter that was remedied in part by THL refinancing a loan to them and providing an extended runway for management to perform while LAI is in an active sales process expected to be concluded in the next 45-60 days.
▪ The non-sponsor portion of THL’s book was 10% at 12/31/18 compared to 15% Q/Q and 16% Y/Y. We expect that despite the significant progress made by the company in exiting legacy investments, there is still a decent amount of inherent risk left in the portfolio that could potentially be subject to further write-downs. In our opinion, this should keep shares at a decent discount to NAV.
▪ The quarterly dividend was cut to $0.21/share from $0.27/share previously. We expected the cut to occur in 3Q19 but also expected to be more severe to $0.19/share. The advisor will now waive any earned incentive fees for all of 2019. At the June shareholders meeting, THL will seek two separate votes that are not conditional on each other. One is to lower the base fee to 100 bps from 150 bps of gross assets less cash and the incentive fee to 17.5% from 20.0% while maintaining the 8% hurdle. The other vote will be to permit THL to reduce its asset coverage to 150% from 200%.
▪ We expect shareholders to vote in approval for both of these measures. Despite the poor performance of TCRD the past few years, the reduced asset coverage should free up the 30% basket and allow Logan to grow further which would enhance the overall yield of the portfolio as well as the Sharpe ratio as we see it. THL is also implementing a $15mm 10b5-1 repurchase program. We respect that the company is doing the right thing with fee reductions and capital management, but for the time being we expect these to be eclipsed by the fear of further NAV declines stemming from more credit issues potentially popping up.
▪ We are revising our 2019 NII/share estimate to $0.99 from $0.95 as a result of no incentive fee being taken during the year and our expectation of lower base fees in 2H19. We are rolling out our 2020 NII/share estimate of $0.86.,” the firm’s analyst wrote.
Other equities research analysts have also recently issued research reports about the company. ValuEngine raised THL Credit from a strong sell rating to a sell rating in a report on Thursday, November 15th. Zacks Investment Research cut THL Credit from a hold rating to a sell rating in a report on Thursday, January 10th. Three analysts have rated the stock with a sell rating and two have given a hold rating to the stock. The stock has an average rating of Sell and an average price target of $8.63.
TCRD opened at $6.72 on Monday. The company has a market cap of $219.54 million, a PE ratio of 6.28 and a beta of 1.16. The company has a current ratio of 0.20, a quick ratio of 0.20 and a debt-to-equity ratio of 0.36. THL Credit has a twelve month low of $5.80 and a twelve month high of $8.75.
THL Credit (NASDAQ:TCRD) last released its quarterly earnings results on Wednesday, March 6th. The investment management company reported $0.23 earnings per share for the quarter, missing the Zacks’ consensus estimate of $0.27 by ($0.04). The business had revenue of $15.80 million for the quarter, compared to the consensus estimate of $15.97 million. THL Credit had a negative net margin of 15.79% and a positive return on equity of 10.69%. As a group, analysts anticipate that THL Credit will post 0.96 earnings per share for the current year.
The company also recently announced a quarterly dividend, which will be paid on Friday, March 29th. Investors of record on Wednesday, March 20th will be issued a dividend of $0.21 per share. The ex-dividend date of this dividend is Tuesday, March 19th. This represents a $0.84 annualized dividend and a yield of 12.50%. THL Credit’s payout ratio is 100.93%.
Large investors have recently made changes to their positions in the stock. FNY Investment Advisers LLC bought a new stake in THL Credit during the fourth quarter worth approximately $83,000. Trexquant Investment LP bought a new stake in THL Credit during the third quarter worth approximately $123,000. B. Riley Wealth Management Inc. bought a new stake in THL Credit during the fourth quarter worth approximately $128,000. Connor Clark & Lunn Investment Management Ltd. bought a new stake in THL Credit during the third quarter worth approximately $238,000. Finally, HRT Financial LLC bought a new stake in THL Credit during the fourth quarter worth approximately $323,000. 38.66% of the stock is currently owned by hedge funds and other institutional investors.
THL Credit Company Profile
THL Credit, Inc is a business development company specializing in direct and fund of fund investments. The fund seeks to invest in debt and equity securities of middle market companies. It seeks to invest in PIPES, growth, acquisition, market or product expansion, recapitalization, mature, and change of control transactions in both sponsored and unsponsored issuers.
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