National Securities downgraded shares of Monroe Capital (NASDAQ:MRCC) from a buy rating to a neutral rating in a research note published on Friday morning, The Fly reports. They currently have $13.00 price objective on the financial services provider’s stock, down from their previous price objective of $16.00.
“ Monroe earned adjusted NII/share of $0.38 for 3Q18, two cents above our estimate and three cents above the quarterly dividend. However, the earnings beat came from the incentive fee not being earned at all during the quarter, which we model to have positively impacted earnings by $0.07/share.
The incentive fee was not earned due to NAV/share declining to $12.97 from $13.35 Q/Q. The decrease in NAV came as a result from realized losses on the equity in Rockdale and Millennial Brands. Gibson was also sold for a realized loss on an accounting basis, but Monroe made a cash-on-cash return on the investment overall.
In July, Rockdale Blackhawk entered chapter 11. This was and still is one of Monroe’s largest portfolio companies, representing 3.7% of the portfolio at cost as of 6/30/18 and 3.8% at 9/30/18. The equity was sold for a loss (although it had a zero cost-basis some of the loan costs were attributed to it) and the loans were written down and placed on non-accrual.
Our biggest issue, and the primary one that moves us to the sidelines with a neutral rating, is the lack of transparency surrounding this investment. Rockdale filed for bankruptcy in July, yet this was not discussed on the earnings call. While we could understand Monroe being comfortable with recovery prospects, marks, asset coverage, and the overall outcome, we cannot fathom why this was not announced given we certainly feel it is a material event.
The market is more likely to now apply a much steeper discount on a go-forward basis for MRCC as it factors in the potential of not having the full picture with regards to portfolio health, as we see it. The market can look past credit issues for a great platform, in our opinion, but will have a harder time looking past trust and uncertainty, in our opinion.
We are revising our 2018 adjusted NII/share estimate to $1.58 from $1.54 and our 2019 adjusted NII/share estimate to $1.50 from $1.58. Our earnings estimates are higher for 2018 as we don’t expect the incentive fee to be earned at all in 4Q18 & 1Q19. ,” the firm’s analyst wrote.
A number of other analysts also recently issued reports on MRCC. TheStreet raised Monroe Capital from a c rating to a b- rating in a research note on Friday, August 31st. Zacks Investment Research downgraded Monroe Capital from a buy rating to a hold rating in a research report on Thursday, July 26th. Janney Montgomery Scott set a $13.00 target price on Monroe Capital and gave the company a buy rating in a research report on Wednesday. BidaskClub raised Monroe Capital from a hold rating to a buy rating in a research report on Thursday, September 13th. Finally, B. Riley set a $14.00 target price on Monroe Capital and gave the company a hold rating in a research report on Friday, August 10th. Two research analysts have rated the stock with a sell rating, five have given a hold rating and one has given a buy rating to the stock. The stock currently has an average rating of Hold and a consensus price target of $13.38.
Monroe Capital (NASDAQ:MRCC) last released its quarterly earnings data on Tuesday, November 6th. The financial services provider reported $0.38 earnings per share (EPS) for the quarter, topping the Zacks’ consensus estimate of $0.36 by $0.02. Monroe Capital had a return on equity of 8.24% and a net margin of 12.16%. The business had revenue of $13.78 million for the quarter, compared to the consensus estimate of $15.36 million. As a group, analysts anticipate that Monroe Capital will post 1.54 EPS for the current year.
Several hedge funds and other institutional investors have recently added to or reduced their stakes in MRCC. Cliffwater LLC increased its position in shares of Monroe Capital by 65.0% during the 3rd quarter. Cliffwater LLC now owns 210,642 shares of the financial services provider’s stock valued at $2,858,000 after purchasing an additional 82,987 shares during the last quarter. WESPAC Advisors LLC increased its position in shares of Monroe Capital by 72.1% during the 3rd quarter. WESPAC Advisors LLC now owns 68,990 shares of the financial services provider’s stock valued at $936,000 after purchasing an additional 28,910 shares during the last quarter. North Star Investment Management Corp. bought a new position in shares of Monroe Capital during the 2nd quarter valued at approximately $323,000. Ashfield Capital Partners LLC bought a new position in shares of Monroe Capital during the 2nd quarter valued at approximately $279,000. Finally, JPMorgan Chase & Co. grew its position in Monroe Capital by 630.3% in the 1st quarter. JPMorgan Chase & Co. now owns 18,989 shares of the financial services provider’s stock valued at $234,000 after acquiring an additional 16,389 shares during the last quarter. 24.55% of the stock is currently owned by hedge funds and other institutional investors.
About Monroe Capital
Monroe Capital Corporation is a business development company specializing in senior, unitranche and junior secured debt and to a lesser extent, unsecured debt and equity investments, and buyouts in middle-market companies. The fund prefers to invest in casinos and gaming, broadcasting, publishing, alcoholic beverage and tobacco distribution, oil and gas, insurance, pharmaceuticals and bio sciences, aerospace and defense, commercial printing, natural rubber, glass, container and packaging, metals and mining, and real estate.
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