OFS Capital Disappoints On NII
Dividend Investing, Growth At A Reasonable Price
Contributor Since 2011
OFS Capital Reports Adjusted NII of $0.2848 compared to a Dividend of $0.34 Business Wire 05-08-15
OFS Capital reported Total investment income of $7.621 million or $0.7897/share. Net investment income was $2.749 million or $0.2848/share while adjusted NII was $0.29/share. The Net increase in net assets resulting from operations was $3.232 million or $0.3349/share. Net asset value was $14.24 compared to $14.24 last quarter.
| Q1-15 | Q4-14 | Q3-14 | Q2-14 | Q1-14 | Q4-13 | Q3-13 | Q2-13 | Q1-13 | |
| Total investment income | 7.621 | 6.953 | 6.197 | 4.658 | 5.012 | 4.452 | 4.017 | 4.236 | 4.365 |
| Net investment income | 2.749 | 2.743 | 2.893 | 2.009 | 1.400 | 1.382 | 1.428 | 1.466 | 1.442 |
| Investments @ fair value | 0.316 | 0.312 | 0.266 | 0.231 | 0.228 | 0.238 | 0.220 | 0.242 | 0.229 |
| Wt Av Share Count | 9.651 | 9.639 | 9.638 | 9.632 | 9.631 | 9.629 | 9.601 | 9.621 | 9.601 |
| TII/share | $0.7897 | $0.7213 | $0.6430 | $0.4836 | $0.5204 | $0.4624 | $0.4184 | $0.4403 | $0.4546 |
| NII/share | $0.2848 | $0.2846 | $0.3002 | $0.2086 | $0.1454 | $0.1435 | $0.1487 | $0.1524 | $0.1502 |
| Adjusted NII/share | $0.29 | $0.33 | $0.30 | $0.22 | $0.15 | $0.14 | $0.15 | $0.15 | $0.18 |
| NAV/share | $14.24 | $14.24 | $14.22 | $14.17 | $14.45 | $14.58 | $14.46 | $14.76 | $14.76 |
| Wt Av Yield | 10.24% | 9.56% | 9.09% | 8.08% | 8.35% | 8.53% | 7.21% | 7.23% | 7.43% |
| Adjusted NII represents NII excluding write-offs of deferred financing costs associated with the credit facility | |||||||||
NII of $0.2848 was below analyst consensus projections
| Earnings Est | Current Qtr. Mar 15 |
Next Qtr. Jun 15 |
Current Year Dec 15 |
Next Year Dec 16 |
|---|---|---|---|---|
| Avg. Estimate | 0.30 | 0.31 | 1.29 | 1.51 |
| No. of Analysts | 4.00 | 4.00 | 4.00 | 3.00 |
| Low Estimate | 0.28 | 0.28 | 1.21 | 1.50 |
| High Estimate | 0.34 | 0.35 | 1.41 | 1.52 |
| Year Ago EPS | 0.15 | 0.22 | 0.99 | 1.29 |
TII of $7.621 million was above analyst consensus projections
| Revenue Est | Current Qtr. Mar 15 |
Next Qtr. Jun 15 |
Current Year Dec 15 |
Next Year Dec 16 |
|---|---|---|---|---|
| Avg. Estimate | 7.42M | 7.96M | 32.43M | 40.99M |
| No. of Analysts | 4 | 4 | 4 | 3 |
| Low Estimate | 6.48M | 6.95M | 28.26M | 34.88M |
| High Estimate | 7.85M | 8.79M | 36.68M | 49.47M |
OFS closed yesterday at a yield of 11.18% and a price to NAV ratio of 0.85. It is slightly down this morning - probably due to the small earnings miss.
While the portfolio is small, it does have granularity. The OFS portfolio was $316.2 million - with outstanding loans of approximately $302.4 million in 58 portfolio companies. A portfolio with a weighted average yield of 10.24% is slightly below sector average in risk.
So why does OFS merit a yield that is so high? It lacks dividend coverage. That scares me - and it should scare you. The analyst are projecting enough NII growth that OFS should arrive at coverage next year. I would like to see more NII/share growth before I accept that projection. NII growth has been great. But the gap between NII and the coverage needed is also a bit large.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.