THL Credit (NASDAQ:TCRD) had its price target decreased by National Securities from $9.00 to $8.00 in a research report report published on Monday morning. National Securities currently has 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.,” National Securities’ analyst wrote.
Several other analysts also recently weighed in on TCRD. ValuEngine upgraded THL Credit from a strong sell rating to a sell rating in a research note on Thursday, November 15th. Zacks Investment Research upgraded THL Credit from a sell rating to a hold rating in a research note on Friday, November 16th. Three research analysts have rated the stock with a sell rating and two have issued a hold rating to the company. The company currently has a consensus rating of Sell and an average target price of $8.63.
THL Credit (NASDAQ:TCRD) last announced its earnings results on Wednesday, March 6th. The investment management company reported $0.23 earnings per share for the quarter, missing the consensus estimate of $0.27 by ($0.04). The business had revenue of $15.80 million for the quarter, compared to analyst estimates of $15.97 million. THL Credit had a negative net margin of 15.79% and a positive return on equity of 10.69%. On average, analysts predict that THL Credit will post 0.96 EPS for the current fiscal year.
The firm also recently announced a quarterly dividend, which will be paid on Friday, March 29th. Stockholders of record on Wednesday, March 20th will be paid a dividend of $0.21 per share. The ex-dividend date is Tuesday, March 19th. This represents a $0.84 annualized dividend and a dividend yield of 12.50%. THL Credit’s dividend payout ratio is presently 100.93%.
Several institutional investors have recently made changes to their positions in the company. Mackenzie Financial Corp grew its stake in THL Credit by 73.1% in the third quarter. Mackenzie Financial Corp now owns 96,843 shares of the investment management company’s stock worth $782,000 after purchasing an additional 40,904 shares in the last quarter. Fiera Capital Corp grew its stake in THL Credit by 66.5% in the fourth quarter. Fiera Capital Corp now owns 1,194,693 shares of the investment management company’s stock worth $7,264,000 after purchasing an additional 477,335 shares in the last quarter. West Family Investments Inc. grew its stake in THL Credit by 24.6% in the fourth quarter. West Family Investments Inc. now owns 766,094 shares of the investment management company’s stock worth $4,658,000 after purchasing an additional 151,296 shares in the last quarter. FNY Investment Advisers LLC acquired a new position in THL Credit in the fourth quarter worth about $83,000. Finally, Cliffwater LLC grew its stake in THL Credit by 94.0% in the third quarter. Cliffwater LLC now owns 282,074 shares of the investment management company’s stock worth $2,276,000 after purchasing an additional 136,650 shares in the last quarter. Institutional investors own 38.66% of the company’s stock.
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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