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Monroe Capital Corporation Has NII Beat And NAV Gain

|Includes: Monroe Capital (MRCC)

I own shares in MRCC, and given that potential bias, I am not going to post comments on this release. Instead, this specific blog post will be a quiz or test on metric awareness. The test:

(1) Why would MRCC merit to sell at a higher than sector average Price/NAV ratio?

(2) Why would MRCC merit to sell at a lower than sector average yield?

(3) Why would a 10% yield be 'more fitting' for MRCC than most other BDCs?

I am not expecting 'test replies' in the comment section - but I would welcome questions or comments about the test.

Monroe Capital Corporation Reports NII of $0.4449 compared to a dividend of $0.35/share
What They Earned Monroe Capital Corporation reported for Q1-16 Total Investment Income of $11.539 million ($0.8871/share). Net Investment Income was $5.787 million ($0.4449/share). The Net Increase in Net Assets Resulting from Operations was $7.994 million ($0.6145/share). NAV was $14.45 compared to $14.19 last quarter.

What They Own At the end of Q1-16 MRCC had debt and equity investments in 53 portfolio companies, with a total fair value of $343.5 million, as of March 31, 2016. MRCC's portfolio consists primarily of first lien loans, representing 75.1% of the portfolio. The weighted average contractual yield on MRCC's investments was 9.9% and the effective yield was 10.0%.

Consensus analyst projections from Yahoo Finance:

Earnings Est Current Qtr.
Mar 16
Next Qtr.
Jun 16
Current Year
Dec 16
Next Year
Dec 17
Avg. Estimate 0.39 0.39 1.57 1.55
No. of Analysts 10.00 10.00 10.00 7.00
Low Estimate 0.37 0.36 1.51 1.47
High Estimate 0.42 0.40 1.62 1.62
Year Ago EPS 0.44 0.43 1.60 1.57
Revenue Est Current Qtr.
Mar 16
Next Qtr.
Jun 16
Current Year
Dec 16
Next Year
Dec 17
Avg. Estimate 10.37M 10.58M 42.57M 46.10M
No. of Analysts 7 7 8 5
Low Estimate 10.00M 10.30M 41.10M 41.10M
High Estimate 10.90M 11.20M 45.00M 52.60M
Year Ago Sales 8.08M 9.52M 36.90M 42.57M

My historical context spreadsheets:

  Q1-16 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 2.157 -793 242 -7 -291 -419 -437 -848 538 -672 -447 438 1797
Realized & Unrealized Gains/share 0.1658 -0.0617 0.0193 -0.0006 -0.0304 -0.0440 -0.0459 -0.0885 0.0551 -0.06724 -0.0501 0.0761 0.3125

In April of 2015 MRCC did a public offering of 2,450,000 shares of its common stock at a public offering price of $14.85/share while the March ending NAV was $14.18. That event should have increased NAV - but MRCC does not disclose the specific amount of NAV increase per share for this event.
In July of 2013 MRCC did a public offering of 4,000,000 shares of its common stock at a public offering price of $14.05 per share while the June ending NAV was $14.01.

  Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14
Interest income 8.604 9.046 8,588 8,178 7,049 7.405 6,889 6,544 5,929
Fee income 331 98 177 559 567 713 387 208 197
Prepayment gain (loss) 337 301 159 503 267 356 223 144 229
Accretion of discounts and amortization of premium 365 320 308 279 198 209 169 150 161
The above are the components of total interest income. Dividend income needs to be added to arrive at total investment income.
Total investment income 11.539 10.126 9.172 9.519 8.081 8.683 7.668 7.046 6.516
Percent of TII from Fee + Prepayment + Accretion 8.95% 7.10% 7.02% 14.09% 12.77% 14.72% 10.16% 7.12% 9.01%
  Q1-16 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 11.539 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 5.787 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 0.343 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 13.008 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 $0.8871 $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 $0.47 $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 $0.35 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34
NII/share - my calculation $0.4449 $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 $14.45 $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 9.9% 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 50.15% 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
On 4-20-15 MRCC announced the completion of a public offering of 2,450,000 shares of stock at $14.85/share, raising approx. $36.4 million.
On 7-22-13 MRCC announced the closing of a public offering of 4,000,000 shares at $14.05 per share, raising approximately $56.2 million.

This data from 5-06-16 might be needed to answer question three.

The Correlation of Weighted Average portfolio yield to BDC yield and weeding out ACSF, FULL, KCAP, OHAI, SAR, TAXI and TICC
The following companies had weighted average yields at or under 9%: FSFR, GBDC, PFLT and SUNS. Their average yield is 9.48%.
The following companies had weighted average yields between 9% and 10%: ARCC, FSIC, FULL and MAIN. Their average yield is 11.12%.
The following companies had weighted average yields between 10% and 11%: BKCC, CMFN, FSC, GARS, MRCC, NMFC, SAR, SCM, SLRC, TCPC and TSLX. Their average yield is 11.55%.
The following companies had weighted average yields between 11% and 12%: AINV, GLAD, GSBD, TCRD and WHF. Their average yield is 12.38%.
The following companies had weighted average yields over 12%: ABDC, CPTA, FDUS, GAIN, HCAP, HRZN, HTGC, MCC, OHAI, PSEC, PNNT, TCAP and TPVG. Their average yield is 13.46%.