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Jeffrey Gall
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Private investor interested in undervalued stocks, ETFs, and bonds.
  • Prospect Capital Q3 2012 Earnings Analysis - Superior Performance Continues 0 comments
    Nov 8, 2012 7:27 PM | about stocks: GLAD, PSEC

    This article provides an analysis of Prospect Capital's (PSEC) 3rd quarter 2012 earnings report. PSEC is a business development company that lends to and invests in private and microcap public businesses. A large majority of their holdings are in industries related to the Energy Sector.

    PSEC continues to:

    • grow book value
    • increase dividends
    • cover dividends with net investment income
    • superior credit quality of underlying portfolio
    • execute secondary offerings above book value (thereby increasing book value on a per share basis)

    For the quarter, PSEC delivered solid numbers, and appears to be well-situated to continue its trend of gradually increasing its dividend and growing book value for the quarters ahead.

    Highlights

    • Net investment income per share of income of $0.46 per share, which covers the quarter's dividend by a factor of 1.5
    • increased books value by $0.05 Q-over-Q while paying out just over $0.30 in dividends
    • This is the trend I like to see: PSEC's net asset value (NAV) in the last eight quarters is as follows (from oldest to newest): 10.25, 10.30, 10.36, 10.41, 10.69, 10,82, 10.83, 10.88
    • During the last 8 quarters, PSEC has increased book value by 6.1% while paying out $2.44 in dividends
    • Zero loans placed on non-accrual status in 5 years. Per the earnings report:

    We are pleased with the overall credit quality of our portfolio, with many of our companies generating year-over-year and sequential growth in top-line revenues and bottom-line profits. None of our loans originated in approximately five years have gone on non-accrual status.

    • Portfolio fair value: $0.99 on the dollar (cost of 2.698B versus fair value of 2.664B). To put this metric in perspective, another business development company that I follow, Gladstone Capital (GLAD), currently values its portfolio at $0.77 on the dollar.
    • Continued improvement in portfolio credit metrics

    The fair market value of our loan assets on non-accrual as a percentage of total assets stood at approximately 1.5% on September 30, 2012, down from 1.9% on June 30, 2012 and 3.5% on June 30, 2011.

    • Equity offerings at: $11.86, $11.59, $11.53, $11.15, and $10.96 - all of which were done above NAV and therefore accretive to NAV
    • Strong balance sheet:

    Our debt to equity ratio stood at less than 45% (and less than 35% after subtraction of cash and equivalents) at September 30, 2012.

    Disclosure: I am long PSEC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Themes: dividend-ideas Stocks: GLAD, PSEC
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