National Securities Reaffirms “Buy” Rating for Oaktree Specialty Lending (OCSL)
National Securities reiterated their buy rating on shares of Oaktree Specialty Lending (NASDAQ:OCSL) in a research report report published on Monday. The brokerage currently has a $7.00 price objective on the credit services provider’s stock.
“▪ OCSL’s NAV/share was up 5.9% sequentially Q/Q to $6.55 from $6.19. We had forecasted NAV/share to finish 3/31/19 at $6.42. The sale of Maverick above prior quarter marks and reversal of technical marks due to spread compression in the quarter gave NAV a significant lift.
▪ Oaktree still has $159.5mm of inherited non-accruals at cost and we expect these to be exited over the course of the next four quarters, with sales proceeds recycled into direct originations which should boost total effective yield and be positive for earnings. Total non-accruals are marked at 54% of cost compared to 63% Q/Q largely from the write-downs of Dominion Diagnostics and Cenegenics.
▪ Oaktree is seeking shareholder approval for reduced asset coverage. With Brookfield acquiring a 63% economic interest, it doesn’t currently impact the investment advisory agreement but at some point it may down the road and thus Oaktree is seeking to have shareholders vote on the investment advisory agreement along with reduced asset coverage. The company will lower fees to 100 bps on assets purchased at over 1.00x D/E but is not changing their targeted leverage range.
▪ We would only expect Oaktree to exceed 1.00x D/E if there is severe and sustained market dislocation, as the broader Oaktree platform is largely opportunistic and countercyclical in how it operates. Until and unless that occurs, we think there is still meaningful room for earnings growth from disposing of the $156mm of non-income producing investments and $32mm of BSL with spreads under 400 bps over LIBOR. The rotation out of these assets and into proprietary originations, opportunistic BSL purchases, and the Kemper JV (whose assets grew to $347mm from $310mm Q/Q) should serve to augment effective yield and thus NIM in F2019.
▪ We are revising our fiscal 2019 NII/share estimate to $0.51 from $0.50 and our fiscal 2020 NII/share estimate to $0.54 from $0.55.,” National Securities’ analyst commented.
Several other equities research analysts also recently commented on the company. Zacks Investment Research raised Oaktree Specialty Lending from a hold rating to a buy rating and set a $6.00 target price for the company in a report on Thursday, May 2nd. ValuEngine downgraded Oaktree Specialty Lending from a buy rating to a hold rating in a report on Monday, April 1st. Finally, TheStreet downgraded Oaktree Specialty Lending from a b rating to a c rating in a report on Friday, March 22nd. Three research analysts have rated the stock with a hold rating and four have given a buy rating to the stock. The stock currently has a consensus rating of Buy and a consensus target price of $5.88.
Oaktree Specialty Lending (NASDAQ:OCSL) last announced its earnings results on Wednesday, May 8th. The credit services provider reported $0.13 EPS for the quarter, beating the consensus estimate of $0.12 by $0.01. Oaktree Specialty Lending had a return on equity of 7.62% and a net margin of 102.18%. The business had revenue of $38.24 million during the quarter, compared to the consensus estimate of $36.90 million. On average, research analysts anticipate that Oaktree Specialty Lending will post 0.49 earnings per share for the current fiscal year.
The firm also recently disclosed a quarterly dividend, which will be paid on Friday, June 28th. Investors of record on Friday, June 14th will be paid a $0.095 dividend. This represents a $0.38 annualized dividend and a yield of 6.81%. The ex-dividend date is Thursday, June 13th. Oaktree Specialty Lending’s dividend payout ratio is currently 88.37%.
In other Oaktree Specialty Lending news, Director Craig A. Jacobson acquired 19,160 shares of Oaktree Specialty Lending stock in a transaction that occurred on Thursday, February 28th. The stock was purchased at an average cost of $5.22 per share, with a total value of $100,015.20. The transaction was disclosed in a filing with the SEC, which is available at this link. Also, major shareholder Leonard M. Tannenbaum sold 153,261 shares of the stock in a transaction dated Friday, February 15th. The stock was sold at an average price of $5.26, for a total value of $806,152.86. The disclosure for this sale can be found here. Over the last three months, insiders sold 795,243 shares of company stock valued at $4,290,338. Company insiders own 0.17% of the company’s stock.
Institutional investors have recently made changes to their positions in the stock. Joseph P. Lucia & Associates LLC purchased a new stake in Oaktree Specialty Lending in the 1st quarter worth about $525,000. Quantamental Technologies LLC purchased a new stake in Oaktree Specialty Lending in the 1st quarter worth about $28,000. Legacy Bridge LLC purchased a new stake in Oaktree Specialty Lending in the 1st quarter worth about $28,000. C M Bidwell & Associates Ltd. purchased a new stake in Oaktree Specialty Lending in the 1st quarter worth about $30,000. Finally, Group One Trading L.P. lifted its stake in Oaktree Specialty Lending by 125.8% in the 1st quarter. Group One Trading L.P. now owns 12,025 shares of the credit services provider’s stock worth $62,000 after acquiring an additional 6,700 shares in the last quarter. 45.76% of the stock is owned by hedge funds and other institutional investors.
About Oaktree Specialty Lending
Oaktree Specialty Lending Corporation is a business development company specializing in investments in middle market, bridge financing, first and second lien debt financing, mezzanine debt, senior and junior secured debt, expansions, sponsor-led acquisitions, and management buyouts in small and mid-sized companies.
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