Medley Capital (MCC) Given Neutral Rating at National Securities
National Securities reiterated their neutral rating on shares of Medley Capital (NYSE:MCC) in a report published on Wednesday morning. The brokerage currently has a $3.00 target price on the investment management company’s stock.
“ MCC earned $0.02/share of NII, drastically below our estimate of $0.13 and the dividend of $0.10. The company still declared a $0.10/share dividend going forward, although we do not expect that earnings would be above $0.05/share if MCC were to remain a standalone entity.
NAV/share was down to $6.43 from $7.02 Q/Q. Management noted on the call that legacy assets were 10.9% of the portfolio at 6/30/18, down from 20% the quarter prior and that of the legacy assets remaining the 6.1% rated 4 or 5 are marked at 29% of par. However, given the underwriting history of the company we don’t really take solace in this.
The fact remains that this vehicle has had disastrous credit history with non-accruals at almost a fourth of the portfolio in one of the most benign credit markets ever. We are unsure of what could potentially take another leg down next quarter and we think the market will likely agree with us and convey its agreement in a discount.
The big announcement in the quarter was that MCC will be merged with its parent company, Medley Management (NYSE: MDLY – NR – $5.35) and Sierra Income Corporation. Sierra is public but nontraded and is set to acquire MCC and MDLY simultaneously.
The new vehicle will be internally managed and will be over $5.0 billion of assets with $2.0 billion being internally managed. MDLY also runs separately managed accounts and other permanent capital vehicles.
Theoretically this should improve the valuation of the franchise but we note that shareholders will still be part of the same platform that brought them MCC and everything that has come with it.
We are continuing to value MCC as a standalone entity until the proxy is filed within a few weeks. Upon filing of the proxy, when we have all the information needed, we will model out the three-party merger and assess the value creation potential of the transaction. We are revising our fiscal 2018 NII/share estimate to $0.24 from $0.35 and our fiscal 2019 NII/share estimate to $0.18 from $0.31 and maintaining our NEUTRAL rating and $3 price target.,” the firm’s analyst commented.
Separately, Zacks Investment Research lowered Medley Capital from a hold rating to a strong sell rating in a research note on Saturday, May 12th. One research analyst has rated the stock with a sell rating and four have issued a hold rating to the stock. Medley Capital currently has a consensus rating of Hold and an average target price of $4.67.
Medley Capital (NYSE:MCC) last posted its quarterly earnings data on Thursday, August 9th. The investment management company reported $0.02 EPS for the quarter, missing the consensus estimate of $0.10 by ($0.08). Medley Capital had a negative return on equity of 1.80% and a negative net margin of 134.96%. sell-side analysts expect that Medley Capital will post 0.39 EPS for the current fiscal year.
The business also recently disclosed a quarterly dividend, which will be paid on Thursday, September 20th. Stockholders of record on Wednesday, September 5th will be paid a $0.10 dividend. The ex-dividend date is Tuesday, September 4th. This represents a $0.40 annualized dividend and a dividend yield of 10.53%. Medley Capital’s dividend payout ratio (DPR) is 59.70%.
Large investors have recently bought and sold shares of the company. BlackRock Inc. increased its stake in shares of Medley Capital by 7.6% in the 4th quarter. BlackRock Inc. now owns 350,650 shares of the investment management company’s stock worth $1,830,000 after purchasing an additional 24,856 shares in the last quarter. Royal Bank of Canada increased its stake in shares of Medley Capital by 49.2% in the 1st quarter. Royal Bank of Canada now owns 122,146 shares of the investment management company’s stock worth $486,000 after purchasing an additional 40,257 shares in the last quarter. Legal & General Group Plc increased its stake in shares of Medley Capital by 18.1% in the 1st quarter. Legal & General Group Plc now owns 198,160 shares of the investment management company’s stock worth $790,000 after purchasing an additional 30,414 shares in the last quarter. Jane Street Group LLC purchased a new stake in shares of Medley Capital in the 4th quarter worth $191,000. Finally, LPL Financial LLC increased its stake in shares of Medley Capital by 31.7% in the 1st quarter. LPL Financial LLC now owns 80,121 shares of the investment management company’s stock worth $319,000 after purchasing an additional 19,304 shares in the last quarter. Hedge funds and other institutional investors own 26.33% of the company’s stock.
Medley Capital Company Profile
Medley Capital Corporation is a non-diversified closed-end management investment company. The Company’s investment objective is to generate current income and capital appreciation by lending directly to privately-held middle market companies, primarily through directly originated transactions to help these companies expand their business, refinance and make acquisitions.
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