Hercules Technology Growth Capital Inc.
) third-quarter 2012 distributable net operating income (DNOI)
came in at 26 cents per share, modestly beating the Zacks
Consensus Estimate of 23 cents. This also compares favorably with
the prior-year quarter's DNOI of 22 cents.
AMER CAP LTD (ACAS): Free Stock Analysis
HERCULES TECH (HTGC): Free Stock Analysis
To read this article on Zacks.com click here.
Results in the quarter benefited from an impressive growth in
total investment income, partially offset by substantially higher
interest expense and loan fees along with increased operating
expenses. Overall, Hercules ended the quarter on a spirited note
with stronger credit quality and high level of liquidity.
Quarter in Detail
Hercules' total investment income came in at $23.9 million, up
27.9% from $18.7 million in the prior-year quarter. The surge
resulted from substantially higher interest income. Moreover,
total investment income was slightly below the Zacks Consensus
Estimate of $24.0 million by 0.4%.
Total operating expenses (excluding interest expense and loan
fees) were $6.5 million, up 11.6% from $5.8 million in the
year-ago quarter. The rise reflects higher general and
administrative expenditure, partly offset by lower employee
On a year-over-year basis, interest expense and loan fees in the
reported quarter soared 41.7% to $6.1 million.
As of September 30, 2012, the weighted average cost of debt,
comprising interest and fees, was 6.7% compared with 6.5% as of
September 30, 2011.
Net investment income (before investment gains and losses) for
the quarter came in at $11.4 million, up 32.1% from $8.6 million
in the year-ago quarter.
The fair value of Hercules' total investment portfolio was nearly
$792.8 million as of September 30, 2012, up 6.6% from $743.7
million as of June 30, 2012. During the quarter, the company
provided approximately $136.4 million in debt and equity funding
to new and existing portfolio companies.
As of September 30, 2012, Hercules' net asset value was $9.42 per
share compared with $9.54 as of June 30, 2012.
Dividend and Repurchase Update
Concurrent with the earning release, the Board of Directors at
Hercules declared a quarterly cash dividend of 24 cents. The
dividend is to be paid on November 21, 2012 to shareholders of
record as of November 14.
The company did not buyback shares of its common stock during the
reported quarter. However, in July 2012, the Board of Directors
approved the extension of the company's share repurchase program
through February 2013.
On October 29, 2012,
American Capital, Ltd
) reported third quarter 2012 operating income of 22 cents per
share, lagging the Zacks Consensus Estimate by a penny. However,
the results compared favorably with the prior-year quarter's
earnings of 19 cents per share.
The favorable outcome was attributable to top-line growth,
followed by decreased operating expenses, reflecting better
expense management. Moreover, new investments and reduction of
debt acted as positives. Yet, increase in non-accrual loans was a
negative for the quarter.
Hercules is well poised to expand its portfolio, given its strong
liquidity position. Additionally, we believe that the company
will continue to gain from the increased market demand for
venture capital investments. Further, its strong capital position
will continue to reinforce investors' confidence in the stock.
In spite of these positives, the ongoing capital market
disruption and sluggish economic recovery make us apprehensive.
We also remain wary of Hercules' investment and credit management
strategies. Moreover, the slow economic recovery may increase the
cost of funding.
Currently, Hercules retains a Zacks #4 Rank, which translates
into a short-term Sell rating.