National Securities lowered shares of Monroe Capital (NASDAQ:MRCC) from a buy rating to a neutral rating in a research report report published on Friday morning, The Fly reports. The firm currently has $13.00 price objective on the financial services provider’s stock, down from their prior 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 commented.
A number of other equities research analysts have also recently weighed in on MRCC. Zacks Investment Research cut Monroe Capital from a buy rating to a hold rating in a research note on Thursday, July 26th. BidaskClub cut Monroe Capital from a hold rating to a sell rating in a research note on Wednesday, August 1st. B. Riley set a $14.00 price objective on Monroe Capital and gave the stock a hold rating in a research note on Friday, August 10th. TheStreet upgraded Monroe Capital from a c rating to a b- rating in a research note on Friday, August 31st. Finally, ValuEngine upgraded Monroe Capital from a sell rating to a hold rating in a research note on Wednesday, September 12th. Two analysts have rated the stock with a sell rating, five have assigned a hold rating and one has given a buy rating to the company. The stock has a consensus rating of Hold and a consensus price target of $13.38.
Monroe Capital (NASDAQ:MRCC) last issued its earnings results on Tuesday, November 6th. The financial services provider reported $0.38 earnings per share for the quarter, topping the Thomson Reuters’ 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 during the quarter, compared to analysts’ expectations of $15.36 million. Research analysts predict that Monroe Capital will post 1.54 EPS for the current fiscal year.
A number of institutional investors have recently added to or reduced their stakes in MRCC. Cliffwater LLC raised its stake in Monroe Capital by 65.0% in the third quarter. Cliffwater LLC now owns 210,642 shares of the financial services provider’s stock valued at $2,858,000 after buying an additional 82,987 shares during the last quarter. WESPAC Advisors LLC raised its stake in Monroe Capital by 72.1% in the third quarter. WESPAC Advisors LLC now owns 68,990 shares of the financial services provider’s stock valued at $936,000 after buying an additional 28,910 shares during the last quarter. North Star Investment Management Corp. purchased a new stake in Monroe Capital in the second quarter valued at about $323,000. Ashfield Capital Partners LLC purchased a new stake in Monroe Capital in the second quarter valued at about $279,000. Finally, JPMorgan Chase & Co. raised its stake in Monroe Capital by 630.3% in the first quarter. JPMorgan Chase & Co. now owns 18,989 shares of the financial services provider’s stock valued at $234,000 after buying an additional 16,389 shares during the last quarter. Institutional investors own 24.55% of the company’s stock.
Monroe Capital Company Profile
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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