Hercules Technology Growth Capital, Inc
) first quarter 2013 distributable net operating income (DNOI)
came in at 30 cents per share, beating the Zacks Consensus
Estimate of 25 cents. This also compares favorably with the
year-ago DNOI of 26 cents.
Better-than-expected results were mainly driven by improvement in
total investment income. However, 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
higher level of liquidity.
Performance in Detail
Hercules' total investment income reached $31.0 million, up 38.4%
from $22.4 million in the prior-year quarter. The surge resulted
from higher interest income. This also compares favorably with
the Zacks Consensus Estimate of $29.0 million.
Total operating expenses (excluding interest expense and loan
fees) for the reported quarter was $7.2 million, surging 20.0%
from $6.0 million in the year-ago period. The rise reflects
higher general and administrative expenditures and increased
On a year-over-year basis, interest expense and loan fees soared
75.2% year over year to $8.7 million.
As of Mar 31, 2013, the weighted average cost of debt, comprising
interest and fees, was 5.9% compared with 6.8% as of Mar 31,
Net investment income (before investment gains and losses) for
the quarter came in at $15.0 million, up 32.1% from $11.4 million
in the year-ago quarter.
The fair value of Hercules' total investment portfolio was $977.7
million as of Mar 31, 2013, rising 6.9% from $914.3 million as of
Dec 31, 2012. During the quarter, the company provided
approximately $224.0 million in debt and equity funding to new
and existing portfolio companies.
As of Mar 31, 2013, Hercules' net asset value was $10.00 per
share compared with $9.75 as of Dec 31, 2012.
Dividend and Repurchase Update
Concurrent with the earning release, the board of directors at
Hercules declared a quarterly cash dividend of 27 cents. The
dividend will be paid on May 21 to shareholders of record as of
May 14. This represents a hike of about 8.0% from the previous
The company did not buyback any shares of its common stock during
the reported quarter. Further, its share repurchase program
expired in Feb 2013.
In the same industry,
American Capital, Ltd
) reported first-quarter 2013 operating income of 14 cents per
share, lagging the Zacks Consensus Estimate by 14 cents.
Lower-than-expected results were primarily attributable to lower
Given its solid liquidity position, Hercules is well positioned
to expand its portfolio. The company's strong capital position is
expected to boost investors' confidence in the stock.
However, the sluggish economic recovery can impede Hercules'
growth going forward. Also, the bleak economic environment might
elevate the cost of funding.
Currently, Hercules carries a Zacks Rank #3 (Hold). Stocks in the
same sector worth considering include -
KCAP Financial, Inc
) with a Zacks Rank #1 (Strong Buy) and
Gladstone Capital Corporation
) with a Zacks Rank #2 (Buy).
AMER CAP LTD (ACAS): Free Stock Analysis
GLADSTONE CAPTL (GLAD): Free Stock Analysis
HERCULES TECH (HTGC): Free Stock Analysis
KCAP FINL INC (KCAP): Free Stock Analysis
To read this article on Zacks.com click here.