TCP Capital had a good fourth quarter with NII of $.40 which exceeded estimates by a bit. The Company did some portfolio cleanup which caused a drop in book but NAV is still at $15.01 versus $15.18 a year ago.
KBW issued their research following the conference call. The KBW future NII estimates have about $.06 per share of possible losses due to possible future portfolio write downs through 2016. TCPC has no portfolio companies currently on non-accrual but Edmentum is being reviewed for possible non-accrual status.
KBW reiterated their "Outperform" rating with a target price of $17.50. The KBW NII estimates are $1.55 for 2015 and $1.65 for 2016 which are nice progressions and both more than cover the $1.44 annual dividend.
Based on this mornings' stock price of $16.03 and the current $1.44 annual dividend, the projected one year total return is 18.15% (8.98% from dividend yield plus 9.17% from gain to the $17.50 target price). Not bad from a BDC with such a excellent historical track record.
The strong improvement in the price of oil over the last couple of days seems to have done wonders for BDC's. The fears that those BDC portfolio companies associated with energy might be in trouble appears to have been mitigated, at least for now. Of the 51 publically traded BDC's, 47 were up in price today and the average price increase was 1.55%, with 7 of them being up over 3%. We don't see many days like that in the BDC world.
Lots of good discussion on the Caesar's bankruptcy filing and its effect on FSIC. So I thought I would add a
Yesterday, KBW issued a two page report on the subject. FSIC has debt in both "The Caesar's Entertainment Operating Company (CEOC), which has filed for bankruptcy, and Caesar's Entertainment Resort Properties, which has not filed for bankruptcy. The FSIC investments in CEOC are at the top of the capital structure and would be paid off first in bankruptcy. Based on the market value of CEOC paper for which pricing is available, KBW estimates that the FSIC paper could be written down by about $2 million which would impact FSIC book by less than $.01 per share. So with no meaningful decline in book due to Caesar's loans, KBW reiterated their "Outperform" rating and suggested this price drop may be an attractive buying opportunity.
It is hard to disagree since at the current price of $9.40 per share, the dividend yield is 9.5% and the gain to the KBW target price of $11.75 is 25.0% for a potential total return of 34.5%. Even if we use the current street target of $11.06 (4 analysts), the total return is still a hefty 27.2%. The price to book at the $9.40 price is .922. All of the above numbers are very attractive given that FSIC is: a) the third largest BDC (by market cap.) of 50 total; b) has a very friendly fee structure; c) has 1 portfolio company on non-accrual of 128 companies in the portfolio: d) has no need and no plans to issue more stock; and e) more than covers its quarterly dividend with NII and has a significant amount of undistributed NII.
The KBW NII estimate for 2015 is $1.03 versus the current annual dividend of $.89. So we could see dividend increases and/or dividend extras going forward.
As always, just one opinion.