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ABDC: This Too Shall Pass: Bad Quarter Presents Buying Opportunity

08/07/2017
By Lisa Thompson

NASDAQ:ABDC

The company (NASDAQ:ABDC) has a best-in-class management fee structure for investors. We believe that ABDC is worth $14.47 per share and at a 12% yield, trades at a rate well above to the average yield of its competitors. The bad quarter just reported gives investors an excellent buying opportunity. Alcentra typically has lumpy quarters and with time should report another exceptionally good quarter as acquisitions typically drive results. In the mean time, investor will be paid a dividend, which right now is yielding over 12%. 

Q2 2017 Earnings 

For the second quarter of 2017, the company reported total investment income of $8.3 million versus $10.6 million last year, a decline of 22%. Adjusted and net investment income was $4.8 million, or $0.36 per share versus $5.9 million and $0.44 per share last year. 

During the three months ended June 30, 2017, Alcentra realized a gain on investments of $30,000 and a decrease in unrealized assets of $9.9 million, primarily due to the loss from one company that was acquired in July. Alcentra has uneven quarters affected by large events primarily caused by acquisitions. We believe this loss quarter will some time be followed by an exceptionally good quarter down the road leading to stock appreciation in addition to a 12% dividend while waiting. 

Net asset value (NAV) was $180.4 million, or $12.73 per share as of June 30, 2017 versus $13.72 per share, on December 31, 2016. During Q2 the company received proceeds from repayments and amortizations on investments of $14.5 million and invested $11.9 million, including investments in three add-on investments and one refinancing. 

Add-on investments during the quarter included the following: 

NTI Holdings, LLC - $3.5 million additional investments in 1st lien notes and $0.1 million of equity 
Black Diamond Rentals - $300,000 investment in tranche C super senior notes

My Alarm Center, LLC - $295,000 investment in second lien notes on April 28. 

LRI Holding, Inc. – $7.2 million additional investments in 1st lien notes and $0.1 million of equity 

While the company had a number of investments teed up for Q2 2017, approximately $35 million worth did not transpire as expected. These were primarily two large deals, one of which is on hold by a third party and the other was not pursued. There are other deals currently in the works.

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