Medley Capital (MCC) Price Target Cut to $3.00 by Analysts at National Securities

Medley Capital (NYSE:MCC) had its price objective cut by National Securities from $5.00 to $3.00 in a report released on Monday. They currently have a neutral rating on the investment management company’s stock.

“• Medley earned NII/share of $0.07 for fiscal 2Q18, below our estimate of $0.13 and the $0.16 quarterly dividend. The dividend was reduced to $0.10/share for the 6/30/18 quarter, slightly lower than our estimate of $0.11. We expect the dividend to be cut again to $0.07/share in fiscal 3Q19.

• Fee income was down significantly Q/Q to $496,000 from $1.9 million as origination fees fell to $161,000 from $1.5 million and prepayment fees went from $20,000 to zero. MCC recognizes the economics of origination fees up-front at the time the loan is made. This aggressive accounting policy puts the company on a hamster wheel to originate in order to keep fee income and thus NII up and in quarters of light originations such as the one ended 3/31/18 it can be substantially adverse for earnings.

• NAV/share fell to $7.02 from $7.71 Q/Q as asset quality continues to slide at Medley. Non-accruals at cost increased to $208.7 million or 23.9% of the portfolio from $161.1 million or 17.0% of the portfolio Q/Q. Four new companies were placed on non-accrual during the quarter: Dynamic Energy, Oxford Mining, The Plastics Group, and Access Media with a combined cost of $36.6 million. Velocity, with a cost of $22.8 million at 12/31/17, was removed from non-accrual status. The continued increases in non-accruals during a benign credit market speak to something extraordinarily wrong at Medley in terms of the underwriting. During a stressed credit market, we cannot fathom what the portfolio would look like.

• We are revising our fiscal 2018 NII/share estimate to $0.35 from $0.52 and our fiscal 2019 NII/share estimate to $0.31 from $0.53. We are maintaining our NEUTRAL rating and lowering our price target to $3 from $5. The only reason we are still NEUTRAL on shares is due to valuation and we think that as the ice cube continues to melt it becomes more and more likely that the external manager could potentially be on the block. Thus, we would not recommend investors sell shares at this level given these considerations.,” the firm’s analyst wrote.

A number of other analysts have also commented on the stock. Zacks Investment Research lowered shares of Medley Capital from a hold rating to a strong sell rating in a research report on Saturday, May 12th. ValuEngine lowered shares of Medley Capital from a buy rating to a hold rating in a research report on Monday, April 2nd. TheStreet lowered shares of Medley Capital from a c- rating to a d+ rating in a research report on Thursday, March 1st. Finally, Barclays cut their price objective on shares of Medley Capital from $7.00 to $5.00 and set an equal weight rating on the stock in a research report on Wednesday, February 7th. Two investment analysts have rated the stock with a sell rating and five have given a hold rating to the stock. The stock has an average rating of Hold and a consensus target price of $5.13.

Shares of MCC stock opened at $3.65 on Monday. The company has a debt-to-equity ratio of 1.14, a quick ratio of 8.52 and a current ratio of 8.52. The firm has a market capitalization of $192.29 million, a PE ratio of 5.45, a price-to-earnings-growth ratio of 1.62 and a beta of 1.20. Medley Capital has a 12 month low of $3.51 and a 12 month high of $3.56.

Medley Capital (NYSE:MCC) last announced its quarterly earnings data on Wednesday, May 9th. The investment management company reported $0.07 EPS for the quarter, missing the Zacks’ consensus estimate of $0.13 by ($0.06). The business had revenue of $17.04 million during the quarter, compared to the consensus estimate of $20.60 million. Medley Capital had a positive return on equity of 6.64% and a negative net margin of 83.68%. analysts anticipate that Medley Capital will post 0.44 earnings per share for the current fiscal year.

The company also recently declared a quarterly dividend, which will be paid on Thursday, June 21st. Shareholders of record on Wednesday, June 6th will be given a dividend of $0.10 per share. This represents a $0.40 annualized dividend and a yield of 10.96%. The ex-dividend date of this dividend is Tuesday, June 5th. Medley Capital’s dividend payout ratio (DPR) is currently 95.52%.

Hedge funds and other institutional investors have recently bought and sold shares of the business. Jane Street Group LLC bought a new stake in Medley Capital during the fourth quarter worth $191,000. Cubist Systematic Strategies LLC raised its position in Medley Capital by 47.9% during the first quarter. Cubist Systematic Strategies LLC now owns 52,227 shares of the investment management company’s stock worth $208,000 after acquiring an additional 16,925 shares in the last quarter. LPL Financial LLC raised its position in Medley Capital by 31.7% during the first quarter. LPL Financial LLC now owns 80,121 shares of the investment management company’s stock worth $319,000 after acquiring an additional 19,304 shares in the last quarter. Legal & General Group Plc raised its position in Medley Capital by 18.1% during the first quarter. Legal & General Group Plc now owns 198,160 shares of the investment management company’s stock worth $790,000 after acquiring an additional 30,414 shares in the last quarter. Finally, Two Sigma Investments LP raised its position in Medley Capital by 132.8% during the fourth quarter. Two Sigma Investments LP now owns 226,719 shares of the investment management company’s stock worth $1,183,000 after acquiring an additional 129,334 shares in the last quarter. 30.66% of the stock is currently owned by hedge funds and other institutional investors.

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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