Capital Southwest (CSWC) PT Raised to $24.00 at National Securities
Capital Southwest (NASDAQ:CSWC) had its price target boosted by investment analysts at National Securities from $23.00 to $24.00 in a research report issued to clients and investors on Monday. The brokerage currently has a “buy” rating on the asset manager’s stock. National Securities’ target price would suggest a potential upside of 25.20% from the company’s current price.
The analysts wrote, “ CSWC earned core NII/share of $0.36 for fiscal 2Q19, two cents above our estimate. The dividend declared came in at $0.44, a $0.34/share base dividend plus the $0.10/share quarterly supplemental dividend. We had previously modeled a $0.41/share total dividend.
Additionally, the earnings were not positively impacted by outsized prepayment-related income, as we see it. Fee income was down to $200K from $385K Q/Q and total repayment/disposition activity declined to $10.9 million on the quarter from $66.6 million in fiscal 1Q19. CSWC’s earnings and dividend growth have begun to outpace our previous projections and we continue to expect a positive trajectory for earnings, dividends, and NAV/share for the company.
The company continues to sit on a $39.4 million unrealized gain on Media Recovery equating to $2.37/share. We expect that this should be realized in fiscal 4Q19 (3/31/18 quarter) and that a special dividend should be paid in the subsequent quarter. For that quarter, we think total dividends (base, regular supplemental, and roughly half of the realized gain from Media Recovery) should total $1.67. For fiscal 2020, we think total dividends paid may be $3.15/share which would be a yield of 16.3% on the 11/9/18 closing price of $19.35.
We think that despite the run-up in shares, the market is still not fully appreciating the value creation of Capital Southwest. The internal management structure, conservative underwriting criteria of management, and potential for significant increases in taxable income and thus distributions continue to point towards further unlocking of value, in our opinion.
We are revising our fiscal 2019 core NII/share estimate to $1.43 from $1.39 and our fiscal 2020 core NII/share estimate to $1.68 from $1.62 and maintaining our BUY rating and increasing our price target to $24 from $23.”
A number of other research analysts also recently commented on the company. BidaskClub raised Capital Southwest from a “buy” rating to a “strong-buy” rating in a research note on Saturday, October 13th. Zacks Investment Research downgraded Capital Southwest from a “hold” rating to a “sell” rating in a research note on Thursday, August 9th. Finally, JMP Securities began coverage on Capital Southwest in a research note on Tuesday, July 31st. They issued an “outperform” rating and a $20.00 price target for the company. One research analyst has rated the stock with a hold rating and four have given a buy rating to the stock. The stock presently has an average rating of “Buy” and a consensus target price of $21.25.
Capital Southwest (NASDAQ:CSWC) last posted its quarterly earnings results on Wednesday, November 7th. The asset manager reported $0.34 EPS for the quarter, beating the Zacks’ consensus estimate of $0.28 by $0.06. The business had revenue of $12.60 million during the quarter, compared to the consensus estimate of $10.58 million. Capital Southwest had a return on equity of 6.23% and a net margin of 102.03%. On average, sell-side analysts predict that Capital Southwest will post 1.28 earnings per share for the current fiscal year.
A number of institutional investors have recently added to or reduced their stakes in CSWC. Bard Associates Inc. grew its position in Capital Southwest by 16.9% in the second quarter. Bard Associates Inc. now owns 19,375 shares of the asset manager’s stock valued at $351,000 after acquiring an additional 2,800 shares during the last quarter. Northern Trust Corp bought a new position in Capital Southwest in the first quarter valued at about $464,000. Sumitomo Mitsui Asset Management Company LTD bought a new position in Capital Southwest in the third quarter valued at about $842,000. Advisory Research Inc. bought a new position in Capital Southwest in the third quarter valued at about $911,000. Finally, Hilltop Holdings Inc. grew its position in Capital Southwest by 30.0% in the second quarter. Hilltop Holdings Inc. now owns 55,300 shares of the asset manager’s stock valued at $1,001,000 after acquiring an additional 12,750 shares during the last quarter. Hedge funds and other institutional investors own 54.34% of the company’s stock.
Capital Southwest Company Profile
Capital Southwest Corporation is a business development company specializing in credit and private equity and venture capital investments in middle market companies, mezzanine, later stage, mature, late venture, emerging growth, buyouts, recapitalizations and growth capital investments. It does not invest in startups, publicly traded companies, real estate developments, project finance opportunities, oil and gas exploration businesses, troubled companies, turnarounds, and companies in which significant senior management is departing.
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