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THL Credit, Inc. Message Board

  • jan814_1999 jan814_1999 Aug 15, 2011 9:22 AM Flag

    A Review

    Hi all.
    TCRD had an outstanding quarter with one caveat. Here is my take on the earnings release and the CC.

    It is not too meaningful to compare this Q2 with the year ago Q2 because the Company was in its' early stages a year ago (IPO was April 22, 2010) so I will compare this Q2 with the previous Q (Q1 2011). Despite that this is a sequential quarterly comparison (Q2 versus Q1), the short period growth was pretty good. NII improved from $.21 per share to $.25. There were no realized gains in either quarter but unrealized gains went from $.04 per share to $.08. Net was $.32 versus $.24. Assets, equity, and portfolio value were all up and the number of portfolio companies increased from 17 to 22. NAV or book increased from $13.07 per share to $13.15. TCRD has an active pipeline and expects to begin to tap its' credit facility in the current quarter, Q3. The Company increased the quarterly dividend to $.26 and is positioned to increase that dividend in each of the next four quarters. There are no non-performing investments in the portfolio.

    The caveat I mentioned is this. The new investments made in Q2 carried lower yields than previous loans, which brought several comments from analysts on the CC. Since the CC, the street NII estimates for coming quarters have been somewhat reduced. For example, Stifel Nicolaus lowered FY 2011 NII from $1.12 to $1.04. But at the same time Stifel said it continues to believe TCRD is a premier player in the BDC sector and reiterated its' "Buy" recommendation. The metrics for TCRD tend to support that premise. Using street estimates (per FC) and Friday's closing stock price, the total potential return (dividend yield plus percent gain to target price) is 33.24%. The stock price is well below book with a "price to book" of .884. The NII per share gain over the next four quarters (again using FC average estimates) is 23.08%. And looking even further forward, if TCRD earns and pays out the expected NII for year 2012 the dividend yield goes to 11.60%.

    Insiders are buying the stock. Here is a brief rundown. On 8/4 the COO bought 1750 shares. Also on 8/4 a director bought 4385 shares. On 8/5, CEO bought 800, CFO bought 245, a director bought 2000. On 8/8 CEO bought 300, CCO bought 1100. On 8/9, CFO bought 180 and a director bought 1500. On 8/10 the president bought 675. Prices for all these buys ran from $10.91 to $12.81 per share.

    So the analysts like the stock. The insiders are buying the stock. And the future progression of both NII growth and dividend payouts remain on the bright side.

    As always, just one opinion.

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