Medley Capital (MCC) PT Lowered to $5.00
Medley Capital (NYSE:MCC) had its price target lowered by equities researchers at National Securities from $6.00 to $5.00 in a research report issued on Wednesday. The brokerage currently has a “neutral” rating on the investment management company’s stock. National Securities’ target price would suggest a potential upside of 17.92% from the company’s previous close.
The analysts wrote, “• For fiscal 1Q18, MCC earned $0.13/share of NII, far short of our $0.17/share estimate and the $0.16/share quarterly dividend. This was despite origination fee income rebounding strongly Q/Q to $1.5 million from $849,000. With Medley recognizing origination fees up-front rather than amortizing them over the expected life of the loan, we think that the company has put itself on a hamster wheel to keep up originations in order to keep earnings elevated.
• With non-accruals weighing on overall portfolio yields and pushing up regulatory leverage, the company will be even more constrained to do new originations. We expect that this will force a substantial quarterly dividend reduction to $0.11/share in the 6/30/18 quarter from $0.16/share currently.
• Non-accruals at amortized cost jumped to $161.1 million or 17.0% of the portfolio from $122.2 million 13.4% of the portfolio Q/Q. This is likely to be a major headwind for effective yield and thus earnings, and despite management stating that they think the worst is behind them we believe the market will take a “show me” approach given the abysmal performance the past several years.
• We asked management about fees and potential stock repurchases on the call. Management stated that there wasn’t discussion on further fee reduction and that buybacks might be considered but we did not get the impression they were too thrilled about the idea of buying back stock. With the vast majority of peers, many of whom are better-performing, at 150 bps of gross assets as a base fee, we are amazed that MCC still collects 175 bps on gross assets up to $1.0 billion. We are equally amazed that with a stock yielding 14% and a 41% discount to NAV that repurchases are not being done in sizable quantities. This is a poor use of capital and we believe this conveys that MCC is clearly acting as an asset gatherer, not credit investor.
• We are revising our fiscal 2018 NII/share estimate to $0.52 from $0.69 and are our fiscal 2019 NII/share estimate to $0.53 from $0.67. “
MCC has been the subject of a number of other research reports. ValuEngine downgraded Medley Capital from a “strong-buy” rating to a “buy” rating in a research report on Sunday, December 31st. Zacks Investment Research downgraded Medley Capital from a “hold” rating to a “sell” rating in a research report on Wednesday, December 13th. Finally, Keefe, Bruyette & Woods set a $6.00 price target on Medley Capital and gave the company a “hold” rating in a research report on Friday, December 8th. Two investment analysts have rated the stock with a sell rating, four have issued a hold rating and one has assigned a buy rating to the company’s stock. The company presently has an average rating of “Hold” and a consensus price target of $5.63.
Medley Capital (NYSE:MCC) last issued its quarterly earnings results on Tuesday, February 6th. The investment management company reported $0.13 earnings per share (EPS) for the quarter, missing the Zacks’ consensus estimate of $0.16 by ($0.03). The business had revenue of $20.63 million for the quarter, compared to the consensus estimate of $22.19 million. Medley Capital had a negative net margin of 58.73% and a positive return on equity of 7.23%. The business’s revenue was down 20.8% compared to the same quarter last year. During the same quarter last year, the business posted $0.19 EPS. equities research analysts expect that Medley Capital will post 0.57 earnings per share for the current fiscal year.
Several institutional investors and hedge funds have recently modified their holdings of MCC. Macquarie Group Ltd. bought a new stake in Medley Capital in the 3rd quarter worth approximately $124,000. Citadel Advisors LLC purchased a new position in Medley Capital in the 2nd quarter worth approximately $156,000. Cubist Systematic Strategies LLC purchased a new position in shares of Medley Capital during the second quarter valued at approximately $158,000. Alpine Woods Capital Investors LLC purchased a new position in shares of Medley Capital during the third quarter valued at approximately $149,000. Finally, Stevens Capital Management LP purchased a new position in shares of Medley Capital during the third quarter valued at approximately $170,000. Hedge funds and other institutional investors own 28.55% of the company’s stock.
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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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