National Securities lowered shares of Gladstone Capital (NASDAQ:GLAD) from a neutral rating to a sell rating in a research note issued to investors on Tuesday morning, Marketbeat Ratings reports. National Securities currently has $7.00 price objective on the investment management company’s stock, down from their previous price objective of $8.00.
“ Gladstone offered five-year, 6.125% unsecured notes with a base amount of $50.0 million. Underwriters were granted a $7.5 million (15%) overallotment option which we anticipate will be exercised in full.
We think this is a good means for GLAD to further term out its liabilities, given it is currently funded with a revolver, term preferred maturing in 6/2021, and term preferred maturing in 9/2024.
The biggest news, and the reason for our downgrade and reduced price target, is Francis Drilling Fluids. Francis previously had its debt investments marked at 76.2% of cost and 75.9% of cost at 6/30/18.
More worrisome is the fact that these debt tranches were marked up from 3/31/18 levels of 65.4% each. Thus, we find it troublesome to see a ~10 point Q/Q markup before Chapter 11 is filed. To us, this shows that Gladstone was very unaware of the issues brewing at Francis. We are unsure of how this translates into further issues down the road at portfolio companies otherwise marked at levels not considered troublesome before another potential bankruptcy of other materially negative event occurs.
As a result, we think NAV/share will decline to $8.15 from $8.86 Q/Q and then to $8.06 in fiscal 4Q19.
We are downgrading shares to SELL from NEUTRAL and lowering our price target to $7 from $8. We are lowering our fiscal 2018 NII/share estimate to $0.83 from $0.86 and our fiscal 2019 NII/share estimate to $0.84 from $0.88. Our $7 price target reflects a 13% discount to our fiscal 4Q19 NAV/share estimate which we believe is warranted given the cyclicality of the portfolio, LMM focus, and high second lien exposure. ,” National Securities’ analyst commented.
GLAD has been the topic of a number of other research reports. TheStreet raised shares of Gladstone Capital from a c+ rating to a b- rating in a research report on Tuesday, July 10th. Zacks Investment Research raised shares of Gladstone Capital from a hold rating to a buy rating and set a $11.00 target price on the stock in a research report on Tuesday, October 9th. BidaskClub raised shares of Gladstone Capital from a buy rating to a strong-buy rating in a research report on Saturday, August 11th. Finally, ValuEngine raised shares of Gladstone Capital from a sell rating to a hold rating in a research report on Monday, July 16th. One research analyst has rated the stock with a sell rating, three have given a hold rating and one has given a buy rating to the company’s stock. The stock presently has an average rating of Hold and an average target price of $9.00.
NASDAQ GLAD traded up $0.03 during trading on Tuesday, reaching $9.25. 115,113 shares of the company’s stock traded hands, compared to its average volume of 133,624. The company has a debt-to-equity ratio of 0.48, a quick ratio of 2.93 and a current ratio of 2.93. The company has a market capitalization of $258.55 million, a price-to-earnings ratio of 11.01 and a beta of 1.03. Gladstone Capital has a 12-month low of $7.80 and a 12-month high of $9.92.
The firm also recently announced a dividend, which will be paid on Friday, November 30th. Shareholders of record on Tuesday, November 20th will be given a dividend of $0.07 per share. The ex-dividend date of this dividend is Monday, November 19th. Gladstone Capital’s dividend payout ratio (DPR) is 100.00%.
Hedge funds and other institutional investors have recently bought and sold shares of the business. Novare Capital Management LLC increased its position in Gladstone Capital by 37.0% during the 3rd quarter. Novare Capital Management LLC now owns 32,750 shares of the investment management company’s stock valued at $311,000 after purchasing an additional 8,850 shares during the period. California Public Employees Retirement System increased its position in Gladstone Capital by 18.5% during the 2nd quarter. California Public Employees Retirement System now owns 44,200 shares of the investment management company’s stock valued at $398,000 after purchasing an additional 6,900 shares during the period. DnB Asset Management AS increased its position in Gladstone Capital by 10.3% during the 2nd quarter. DnB Asset Management AS now owns 62,001 shares of the investment management company’s stock valued at $559,000 after purchasing an additional 5,800 shares during the period. Millennium Management LLC purchased a new position in shares of Gladstone Capital in the 1st quarter worth approximately $568,000. Finally, JPMorgan Chase & Co. grew its position in shares of Gladstone Capital by 8.0% in the 1st quarter. JPMorgan Chase & Co. now owns 91,192 shares of the investment management company’s stock worth $785,000 after buying an additional 6,792 shares during the last quarter. 12.00% of the stock is currently owned by institutional investors and hedge funds.
About Gladstone Capital
Gladstone Capital Corporation is a business development company specializing in debt investments in senior loans, second lien loans, senior subordinated loans, junior subordinated loans, and mezzanine loans and equity investments in the form of common stock, preferred stock, limited liability company interests, or warrants.
Further Reading: Fundamental Analysis and Individual Investors
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