Prospect Capital Corporation (PSEC) was added to the portfolio in February, 2013. PSEC is a business development company that provides private debt and equity capital to middle-market companies in the U.S. and Canada. Its initial public offering was in 2004. From the company’s website: “PSEC invests primarily in first-lien and second-lien senior loans and mezzanine debt, which in some cases include an equity component. We provide capital to middle-market companies and private equity financial sponsors for refinancings, leveraged buyouts, acquisitions, recapitalizations, later-stage growth investments, and capital expenditures.”
CEO John Francis Barry III has been involved in equity financing since 1990. Prior to that he was an investment banker and an attorney. The management team has a 23-year history and has invested in more than 200 middle-market companies. The senior executives have worked together for more than a decade, through multiple economic and investing cycles. From the company website: “Prospect Capital targets attractive risk-adjusted and consistent, low-volatility returns. Our investment strategy focuses on current cash yields through interest payments and, in some cases, dividend payments. We also target capital appreciation from preferred equity, common equity and/or warrant positions that may be made alongside our debt investments.”
As of December 8, 2012, the portfolio consisted of 79 companies. Eleven companies sell durable consumer products, ten companies are in various aspects of financial services, nine companies are in the healthcare sector, eight are in manufacturing or machinery, five are in oil and gas production, five are in consumer or commercial services and three sell food products. Other represented industries include transportation, chemicals, media, energy, ecological, property management, minerals, metals, insurance, automotive, textiles and leather, software and computer services, business services, and contracting. As of December 31, 2012, PSEC reported investments in 106 companies. (Recent investments are listed in the 2013 Q2 report.)
From the company website: “Prospect invests in a variety of businesses, industries, and geographic regions. We have expertise across multiple industries, including energy, industrials, media, manufacturing, industrials, business services, financial services, food, healthcare, and many other sectors.
“We focus on middle-market companies in the United States and Canada with EBITDA of $5 million to $150 million. We principally target companies with a history of stable revenues and profitability, strong market and competitive positions, and proven management. We analyze each investment with a primary focus on preserving capital and generating current cash yields.”
“We focus on middle-market companies in the United States and Canada with EBITDA of $5 million to $150 million. We principally target companies with a history of stable revenues and profitability, strong market and competitive positions, and proven management. We analyze each investment with a primary focus on preserving capital and generating current cash yields.”
PSEC’s first quarterly dividend of $.10 was paid in December, 2004. The dividend was raised each quarter (sometimes by a fraction of a cent) through April, 2010. Beginning in July, 2010, PSEC lowered its payout and began paying a monthly dividend of $.10. Since then, the dividend has been increased in small, fraction-of-a-cent increments. On February 7, 2013, the company announced upcoming dividends, payable on:
March 21 $.11005, April 18 $.110075, and May 23 $.1101.
For the quarter ending December 31, 2012 (PSEC’s 2013 Q2), net investment income was $.51 per share, compared with $.33 per share in the year-ago quarter. For the six months ending December 31, 2012 (the first six months of fiscal 2013), net investment income was $.97, compared with $.59 for the six months ending December, 2011.
Net asset value as of December 31, 2012 was $10.81.
PSEC’s February 7, 2013 quarterly earnings news release included this statement about its balance sheet: “Our modestly leveraged balance sheet is a source of significant strength. Our debt to equity ratio stood at 47.8% (29.2% after subtraction of cash and cash equivalents) at December 31, 2012. Our equitized balance sheet also gives us the potential for future earnings upside as we prudently look to utilize and grow our existing revolving credit facility as well as potentially add additional secured or unsecured term facilities, made more attractive by our investment-grade ratings at corporate, revolving facility, and term debt levels.”
Morningstar reports a price earnings ratio of 8.8 at the February 21 closing price of 11.06, with a five-year average P/E ratio of 13.9. The 52-week high was $12.25 and the 52-week low was $9.80. With an annual dividend of $1.32, at the February 21 closing price of $11.06, PSEC's yield was 11.9%.
PSEC and PennantPark (PNNT) are the two business development companies in the portfolio. The target allocation is for each to represent 5% of the portfolio, for a BDC total allocation of 10%.
This is not a recommendation to buy PSEC, but rather is presented to help you decide whether it is a stock you may want to study. Do your own due diligence.
No comments:
Post a Comment