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MRCC NAV Falls 0.0141% - NII Misses By A Penny

|Includes: Monroe Capital (MRCC)

MRCC has year over year NAV growth. In this environment - that merits a "Wow!". MRCC has strong NII coverage of its dividend - thus it has the potential for low single digit dividend growth (specifically - the current $0.35 dividend should grow to $0.37 over two plus years - with decent odds of growth to $0.38 over three years - but I do not have an ongoing expectation of regular dividend growth). First lien loans represent 75.9% of the portfolio. That's the good news. But the NII/TII ratio is not that good. The wider than average spreads in the NII projections are a concern - and the NII/quarter numbers have been less than predictable.

Bottom line - MRCC has enough strongly positive attributes for it to merit selling slightly above its NAV. MRCC shares should rise on this news - but investors (who know the value of nothing) will have to be told MRCC is a buy before it rises above its NAV.

Monroe Capital Corporation reported for Q4-15 Total Investment Income of $10.126 million ($0.7873/share). Net Investment Income was $5.005 million ($0.3892/share). The Net Increase in Net Assets Resulting from Operations was $4.212 million ($0.3275/share). NAV was $14.19 compared to $14.21 last quarter.

The analyst consensus projections from Yahoo Finance:

Earnings Est Current Qtr.
Dec 15
Next Qtr.
Mar 16
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate 0.40 0.40 1.62 1.60
No. of Analysts 10.00 9.00 10.00 10.00
Low Estimate 0.35 0.35 1.56 1.44
High Estimate 0.46 0.43 1.69 1.88
Year Ago EPS 0.48 0.44 1.55 1.62
Revenue Est Current Qtr.
Dec 15
Next Qtr.
Mar 16
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate 10.29M 10.63M 37.01M 44.42M
No. of Analysts 6 6 7 7
Low Estimate 9.39M 9.52M 36.16M 38.86M
High Estimate 10.90M 11.10M 37.60M 46.90M
Year Ago Sales 8.68M 8.08M 29.91M 37.01M

My MRCC spreadsheets:

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

Realized & Unrealized Gains -793 242 -7 -291 -419 -437 -848 538 -672 -447 438 1797
Realized & Unrealized Gains/share -0.0617 0.0193 -0.0006 -0.0304 -0.0440 -0.0459 -0.0885 0.0551 -0.06724 -0.0501 0.0761 0.3125
  Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13 Q2-13 Q1-13

Total investment income 10.126 9.172 9.519 8.081 8.683 7.668 7.046 6.516 6.395 4.347 3.752 3.719
Net investment income 5.005 4.498 5.071 4.167 4.621 3.810 3.501 3.130 3.184 2.413 1.550 1.503
Adjusted NII before incentives         4.560 3.727 3.345 3.238 3.074 2.450 1.702 1.672
Investments @ fair value 0.341 0.330 0.283 0.253 0.234 0.235 0.238 0.225 0.208 0.169 0.144 0.134
Wt Av Share Count 12.861 12.545 11.718 9.562 9.518 9.527 9.582 9.761 10.000 8.922 5.765 5.751
TII/share $0.7873 $0.7311 $0.8123 $0.8451 $0.9123 $0.8049 $0.7353 $0.6676 $0.6935 $0.4872 $0.6508 $0.6467
Adjusted NII/share - my calculation         $0.4791 $0.3912 $0.3491 $0.3317 $0.3074 $0.2746 $0.2952 $0.2907
Adjusted NII/share - their calculation $0.40 $0.36 $0.43 $0.44 $0.49 $0.40 $0.37 $0.32 $0.32 $0.27 $0.27 $0.26
Dividend/share $0.35 $0.35 $0.35 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34
NII/share - my calculation $0.3892 $0.3585 $0.4328 $0.4358 $0.4855 $0.3999 $0.3654 $0.3207 $0.3184 $0.2704 $0.2689 $0.2613
NAV/share $14.19 $14.21 $14.18 $14.11 $14.05 $13.95 $13.93 $13.99 $13.92 $14.01 $14.78 $14.54
Wt Av Yield 10.3% 10.5% 10.8% 11.1% 11.0% 10.8% 10.5% 10.2% 9.9% 9.5% 9.6% 9.8%
NII/TII Ratio 49.43% 49.04% 53.27% 51.57% 53.22% 49.69% 49.69% 48.03% 49.79% 55.51% 41.31% 40.41%

prepayment and amendment fees along with paydown gains added $0.05/share more than usual in Q4-14
Typically - 'adjustments' produce more real numbers. MRCC adjustments did the opposite. That stoped in Q1-15

Disclosure: I am/we are long MRCC.