National Securities reiterated their sell rating on shares of Gladstone Capital (NASDAQ:GLAD) in a research report sent to investors on Monday morning. National Securities currently has a $7.00 price objective on the investment management company’s stock.
“? Gladstone’s NAV/share decreased by 4.1% on the quarter to $7.98 from $8.32 after falling by 6.1% Q/Q the quarter prior. Francis was marked at 27% of cost last quarter and during the 12/31/18 quarter GLAD recognized a $26.9mm realized loss on Francis. With the chapter 11 restructuring, Gladstone’s $27.0mm of debt in Francis was rolled into $1.35mm of equity and the company also purchased an additional $5.0mm of equity in the new entity, “FES Resources.”
? The portfolio at fair value increased to $431.2mm from $390.1mm Q/Q as Gladstone had very robust originations of $59.2mm and only $8.9mm of repayments. During the quarter the company issued $57.5mm of 2023 notes and has the ability to go above 1.00x D/E. We expect the company to exceed 1.00x in F3Q20 although thus far the company has not decided to reduce fees on incrementally higher leverage and thus the benefit to shareholders from this increase is likely to be muted as fees increase with the augmented balance sheet.
? The market has, in our opinion, surprisingly shrugged off substantial NAV declines and continued to award GLAD shares a 12% premium to 12/31/18 NAV (as of 2/8/19). Despite the dividend being earned on a NII basis we do not expect NII/share to have growth levers.
? Additionally, while GLAD wrapped up 12/31/18 with no non-accruals after the restructuring of Francis, we think there is heightened risk that the largely non-sponsor LMM portfolio experiences further stress going forward. Accordingly, we continue to think shares warrant a discount to forward NAV estimates. We note that our target price of $7 represents an 11% discount to our F4Q20 NAV/share estimate of $7.83, which is only a decrease of 1.9% from F1Q19 levels.
? We are maintaining our fiscal 2019 NII/share estimate of $0.84 and revising our fiscal 2020 NII/share estimate to $0.86 from $0.84. ,” National Securities’ analyst commented.
GLAD has been the subject of several other reports. ValuEngine downgraded Gladstone Capital from a hold rating to a sell rating in a research note on Friday, December 21st. Zacks Investment Research raised Gladstone Capital from a sell rating to a hold rating in a research note on Monday, January 21st. TheStreet downgraded Gladstone Capital from a b- rating to a c rating in a research note on Monday, December 10th. Finally, BidaskClub raised Gladstone Capital from a hold rating to a buy rating in a research note on Thursday, November 15th. One research analyst has rated the stock with a sell rating, two have assigned a hold rating and one has assigned a buy rating to the stock. The company currently has a consensus rating of Hold and a consensus price target of $9.00.
Gladstone Capital (NASDAQ:GLAD) last announced its quarterly earnings data on Wednesday, February 6th. The investment management company reported $0.21 earnings per share (EPS) for the quarter, hitting the consensus estimate of $0.21. The firm had revenue of $11.91 million during the quarter, compared to the consensus estimate of $12.13 million. Gladstone Capital had a return on equity of 9.99% and a net margin of 16.68%. On average, research analysts anticipate that Gladstone Capital will post 0.85 earnings per share for the current fiscal year.
The firm also recently disclosed a monthly dividend, which will be paid on Thursday, February 28th. Shareholders of record on Wednesday, February 20th will be given a $0.07 dividend. The ex-dividend date is Tuesday, February 19th. This represents a $0.84 annualized dividend and a yield of 9.63%. Gladstone Capital’s payout ratio is 98.82%.
In related news, President Robert L. Marcotte bought 12,000 shares of the company’s stock in a transaction that occurred on Friday, December 7th. The shares were acquired at an average price of $8.33 per share, for a total transaction of $99,960.00. Following the completion of the acquisition, the president now owns 460,037 shares of the company’s stock, valued at approximately $3,832,108.21. The transaction was disclosed in a legal filing with the Securities & Exchange Commission, which is available at this link. Also, President Robert L. Marcotte acquired 10,000 shares of the company’s stock in a transaction on Tuesday, November 20th. The stock was acquired at an average price of $8.71 per share, for a total transaction of $87,100.00. The disclosure for this purchase can be found here. Insiders bought a total of 22,582 shares of company stock valued at $192,077 over the last three months. Insiders own 5.85% of the company’s stock.
A number of hedge funds and other institutional investors have recently added to or reduced their stakes in the business. California Public Employees Retirement System lifted its stake in shares of Gladstone Capital by 18.5% in the 2nd quarter. California Public Employees Retirement System now owns 44,200 shares of the investment management company’s stock valued at $398,000 after acquiring an additional 6,900 shares during the last quarter. TCI Wealth Advisors Inc. grew its holdings in Gladstone Capital by 53.4% during the 4th quarter. TCI Wealth Advisors Inc. now owns 25,082 shares of the investment management company’s stock worth $183,000 after acquiring an additional 8,733 shares during the period. Novare Capital Management LLC grew its stake in shares of Gladstone Capital by 37.0% in the 3rd quarter. Novare Capital Management LLC now owns 32,750 shares of the investment management company’s stock valued at $311,000 after buying an additional 8,850 shares during the period. PFG Advisors acquired a new stake in shares of Gladstone Capital in the 4th quarter valued at about $84,000. Finally, Cornerstone Wealth Management LLC grew its stake in shares of Gladstone Capital by 5.3% in the 3rd quarter. Cornerstone Wealth Management LLC now owns 239,268 shares of the investment management company’s stock valued at $25,054,000 after buying an additional 12,030 shares during the period. Hedge funds and other institutional investors own 11.73% of the company’s stock.
Gladstone Capital Company Profile
Gladstone Capital Corporation is a private equity and a venture capital fund specializing in lower middle market, growth capital, add on acquisitions, debt investments in senior loans, second lien loans, senior subordinated loans, junior subordinated loans, and mezzanine loans and equity investments in the form of common stock, preferred stock, limited liability company interests, or warrants.
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