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PennantPark Investment Corporation Delivers Bad News In Smaller Than Expected Doses

May 04, 2016 5:35 PM ETPNNT
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Due to its exposure in energy loans, bad things were projected for PennantPark Investment Corporation. The fall in NAV was not as bad as might be expected. NII still coverage the dividend. but non-accruals are high and growing.

PNNT Reports NII of $0.2909/share compared to a dividend of $0.28
What They Earned PennantPark Investment Corporation reported calendar Q1-16 total investment income of $39.108 million ($0.5461/share). Net investment income was $20.832 million ($0.2909/share). The net increase in net assets from operations was $3.950 million ($0.0551/share) due to $16.882 million in realized and unrealized losses. Net asset value per share was $8.83 compared to $9.02 at the end of Q1-16. "Oil and gas" investments have declined to 5% of the portfolio from 6% in Q4-15. "Energy and utilities" have had an identical decline. (The high point of the combined energy weighting was 16%.) During the three months ended March 31, 2016, PNNT repurchased 0.7 shares of common stock in open market transactions for an aggregate cost (including transaction costs) of $3.7 million - which had a + $0.08/share effect on NAV. "Energy and Utilities" loans were 5% of assets while "Oil and Gas" loans were 4% of assets.

What They Own As of March 31, 2016, PNNT had four companies on non-accrual, representing 7.2% and 2.3% of our overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized depreciation of $181.1 million as of March 31, 2016. PNNT's overall portfolio consisted of 61 companies with an average investment size of $20.2 million, had a weighted average yield on interest bearing debt investments of 11.9% and was invested 37% in senior secured debt, 39% in second lien secured debt, 14% in subordinated debt and 10% in preferred and common equities. As of December 31, 2015, PNNT had three companies on nonaccrual representing 5.4% of the overall portfolil at cost and 1.2% at fair value.

The Yahoo Finance consensus analyst projections:

Earnings Est Current Qtr.
Mar 16
Next Qtr.
Jun 16
Current Year
Sep 16
Next Year
Sep 17
Avg. Estimate 0.29 0.25 1.05 1.00
No. of Analysts 10.00 10.00 10.00 8.00
Low Estimate 0.25 0.21 0.98 0.93
High Estimate 0.32 0.27 1.10 1.04
Year Ago EPS 0.29 0.28 1.10 1.05
Revenue Est Current Qtr.
Mar 16
Next Qtr.
Jun 16
Current Year
Sep 16
Next Year
Sep 17
Avg. Estimate 38.54M 35.23M 144.55M 148.49M
No. of Analysts 9 9 9 7
Low Estimate 35.70M 32.27M 138.90M 143.40M
High Estimate 41.00M 36.80M 148.14M 156.00M
Year Ago Sales 42.66M 40.64M 161.63M 144.55M

My historical context spreadsheets:

Q1-2016 Q4-2015 Q3-2015 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13 Q2-13 Q1-13
Realized & Unrealized Gains -16.882 -57.587 -18.646 -15.718 -14.717 -43.423 -21.250 18.753 20.652 21.500 5.379 -3.869 12.910
Realized & Unrealized Gains/share -.2357 -.7917 -.2483 -.2102 -.1960 -.5783 -.2830 .2817 .3102 .3230 .0808 -.2936 .2216

Q1-2016 Q4-2015 Q3-2015 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13

Total investment income 39.108 35.264 39.122 40.641 42.661 39.205 40.144 35.475 37.879 34.439
Net investment income 20.832 16.831 20.031 20.654 22.096 19.477 20.148 13.196 * 20.029 17.955
Investments @ fair value 1.213 1.262 1.299 1.294 1.300 1.341 1.318 1.198 1.257 1.209
Wt Av Share Count 71.618 72.741 75.093 74.780 75.093 75.093 75.093 66.569 66.569 66.547
TII/share $0.5461 $0.4848 $0.5210 $0.5435 $0.5681 $0.5221 $0.5346 $0.5329 $0.5690 $0.5175
NII/share $0.2909 $0.2314 $0.2667 $0.2762 $0.2942 $0.2594 $0.2683 $0.1982 * $0.3009 $0.2704
NAV/share $8.83 $9.02 $9.82 $10.04 $10.25 $10.43 $11.03 $11.33 $11.13 $10.80
Weighted Average Yield 11.9% 12.2% 12.1% 12.4% 12.4% 12.5% 12.5% 12.3% 12.7% 13.2%

PNNT had $3.85 million ($0.0578/share) in debt issuance costs in Q2-14

Analyst's Disclosure: I am/we are long PNNT.

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