Hercules Technology Growth Capital Inc.
) fourth quarter 2012 distributable net operating income (DNOI)
came in at 27 cents per share, beating the Zacks Consensus
Estimate of 23 cents. This also comes in line with the prior-year
quarter's DNOI of 27 cents.
For full-year 2012, DNOI came in at $1.07 per share, up 7%
compared with $1.00 per share in 2011. Moreover, it surpassed the
Zacks Consensus Estimate of 96 cents.
Better-than-expected quarterly results were mainly driven by
improvement in total investment income. Yet, higher interest
expense and loan fees along with increased operating expenses
marginally subdued the results. Overall, Hercules ended the
quarter with a robust performance comprising stronger credit
quality and a high level of liquidity.
Performance in Detail
Hercules' total investment income reached $27.4 million, up 29.2%
from $21.2 million in the prior-year quarter. The surge resulted
from higher interest income and rise in total fees. Moreover,
total investment income surpassed the Zacks Consensus Estimate of
For full year 2012, total investment income reached $97.5
million, up 22.1% year over year. Further, it surpassed the Zacks
Consensus Estimate of $95.0 million.
Total operating expenses (excluding interest expense and loan
fees) for the reported quarter was $6.9 million, surging 19.0%
from $5.8 million in the year-ago period. The rise reflects
higher general and administrative expenditures and higher
On a year-over-year basis, interest expense and loan fees in the
reported quarter soared 62.7% to $7.5 million.
As of Dec 31, 2012, the weighted average cost of debt, comprising
interest and fees, was 6.29% compared with 6.23% as of Dec 31,
Net investment income (before investment gains and losses) for
the quarter came in at $13.1 million, up 20.7% from $10.8 million
in the year-ago quarter.
The fair value of Hercules' total investment portfolio was $914.3
million as of Dec 31, 2012, rising 15.3% from $792.8 million as
of Sep 30, 2012. During the quarter, the company provided
approximately $200.7 million in debt and equity funding to new
and existing portfolio companies.
As of Dec 31, 2012, Hercules' net asset value was $9.75 per share
compared with $9.42 as of Sep 30, 2012.
Dividend and Repurchase Update
Concurrent with the earning release, the board of directors at
Hercules declared a quarterly cash dividend of 25 cents. The
dividend will be paid on Mar 19 to shareholders of record as of
Mar 11. This represents about 4.2% hike in the dividend from the
The company did not buyback shares of its common stock during the
reported quarter. Further, its share repurchase program expired
in Feb 2013.
Performance of Other Company in the Same
American Capital, Ltd.
) reported fourth quarter 2012 operating income of 26 cents per
share, beating the Zacks Consensus Estimate by a penny. The
favorable outcome was attributable to top-line growth, followed
by decreased operating expenses reflecting prudent expense
Moreover, new investments and reduction of debt acted as
positives. Yet, the low-interest environment during the quarter
was a negative.
Hercules is well positioned to expand its portfolio considering
its strong liquidity position. The company's solid capital
position is expected to reinforce investors' confidence in the
However, the ongoing capital market disruption and sluggish
economic recovery can affect its growth. Also, the bleak economic
environment might elevate the cost of funding.
AMER CAP LTD (ACAS): Free Stock Analysis
HERCULES TECH (HTGC): Free Stock Analysis
NEWSTAR FIN INC (NEWS): Free Stock Analysis
SAFEGUARD SCTFC (SFE): Free Stock Analysis
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Currently, Hercules retains a Zacks Rank #3 (Hold). Other stocks
in the same sector that are performing well and can be considered
for investment include -
NewStar Financial, Inc.
Safeguard Scientifics, Inc.
). Both these companies carry a Zacks Rank #2 (Buy).