Oaktree Specialty Lending’s (OCSL) Neutral Rating Reaffirmed at National Securities
Oaktree Specialty Lending (NASDAQ:OCSL)‘s stock had its “neutral” rating reiterated by research analysts at National Securities in a research report issued to clients and investors on Monday. They currently have a $5.00 target price on the credit services provider’s stock. National Securities’ price objective points to a potential upside of 13.12% from the stock’s current price.
The analysts wrote, “• For fiscal 1Q18, OCSL posted NII/share of $0.09, a penny shy of our estimate and lower than the $0.125/share quarterly dividend. The dividend was, not surprisingly, reduced to $0.085/share the following quarter (we had estimated $0.09/share). However, the uncertainty around the dividend level remains with management preferring to assess this a quarter at a time, which will warrant a discounted valuation in a yield-oriented vehicle. The company has shown no inclination to waive fees to support the $0.085/share dividend.
• Additionally, the company outright refused to consider an incentive fee total return lookback feature, which will likely cause the stock to be valued more in the bottom tier of BDCs, asset quality improvement notwithstanding. The company also was not enthusiastic about repurchases despite the heavy NAV discount and sizable dividend yield, which would generate riskless ROC far beyond what they could earn in the middle market. We are highly disappointed in this.
• Non-accruals at amortized cost (which includes PIK non-accruals) increased modestly to $228.4 million (including SLF exposure) or 13.6% of the portfolio at cost from $225.6 million (including SLF exposure) or 12.8% of the portfolio Q/Q. Unrealized losses pertaining to non-accruals increased $28.5 million Q/Q. The good news is that half of non-accruals are currently in active sales processes.
• Management provided significant detail on its portfolio rotation and said that from 9/30/17 through January 2018 the company has monetized $357 million of legacy investments with $418 million of performing debt investments remaining and over $100 million of equity/LP interest remaining.
• We are revising our fiscal 2018 NII/share estimate to $0.40 from $0.41 and our fiscal 2019 NII/share estimate to $0.42 from $0.40. “
A number of other research analysts have also recently commented on the company. Keefe, Bruyette & Woods set a $5.00 target price on Oaktree Specialty Lending and gave the company a “hold” rating in a research note on Friday. JPMorgan Chase & Co. raised Oaktree Specialty Lending from a “neutral” rating to an “overweight” rating and set a $6.00 target price on the stock in a research note on Tuesday, February 6th. BMO Capital Markets reaffirmed a “hold” rating and set a $5.00 target price on shares of Oaktree Specialty Lending in a research note on Monday, January 8th. Maxim Group reaffirmed a “hold” rating on shares of Oaktree Specialty Lending in a research note on Tuesday, December 26th. Finally, Zacks Investment Research cut Oaktree Specialty Lending from a “buy” rating to a “hold” rating in a research note on Saturday, December 2nd. One analyst has rated the stock with a sell rating, six have issued a hold rating and five have assigned a buy rating to the stock. Oaktree Specialty Lending presently has a consensus rating of “Hold” and a consensus target price of $5.63.
Oaktree Specialty Lending (NASDAQ:OCSL) last released its earnings results on Thursday, February 8th. The credit services provider reported $0.09 EPS for the quarter, missing analysts’ consensus estimates of $0.10 by ($0.01). The business had revenue of $33.88 million for the quarter, compared to the consensus estimate of $35.00 million. Oaktree Specialty Lending had a negative net margin of 95.68% and a positive return on equity of 6.74%. sell-side analysts forecast that Oaktree Specialty Lending will post 0.37 EPS for the current year.
In other news, Director Richard Ruben acquired 14,550 shares of the company’s stock in a transaction that occurred on Wednesday, December 6th. The shares were bought at an average price of $4.82 per share, with a total value of $70,131.00. The transaction was disclosed in a filing with the Securities & Exchange Commission, which can be accessed through this link. Also, COO Mathew Pendo acquired 12,000 shares of the company’s stock in a transaction that occurred on Friday, December 15th. The stock was purchased at an average cost of $4.66 per share, for a total transaction of $55,920.00. The disclosure for this purchase can be found here. In the last three months, insiders purchased 362,534 shares of company stock worth $1,734,287. 0.10% of the stock is owned by insiders.
Large investors have recently made changes to their positions in the stock. Comerica Bank bought a new position in Oaktree Specialty Lending in the fourth quarter worth approximately $109,000. Hillsdale Investment Management Inc. purchased a new stake in Oaktree Specialty Lending during the third quarter worth $129,000. Wells Fargo & Company MN purchased a new stake in Oaktree Specialty Lending during the fourth quarter worth $173,000. Moody National Bank Trust Division purchased a new stake in Oaktree Specialty Lending during the fourth quarter worth $197,000. Finally, Pinebridge Investments L.P. purchased a new stake in Oaktree Specialty Lending during the fourth quarter worth $331,000. 35.87% of the stock is currently owned by institutional investors.
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About Oaktree Specialty Lending
Oaktree Specialty Lending Corporation, formerly Fifth Street Finance Corp., is a specialty finance company. The Company is focused on providing customized one-stop credit solutions to companies with limited access to public or syndicated capital markets. The Company provides companies with flexible financing solutions including first and second lien loans, unsecured and mezzanine loans, and preferred equity.
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