Garrison Capital (NASDAQ:GARS) was downgraded by equities research analysts at National Securities from a “buy” rating to a “neutral” rating in a research report issued on Tuesday, Marketbeat Ratings reports. They presently have a $8.00 price objective on the investment management company’s stock, down from their previous price objective of $10.00. National Securities’ price objective would suggest a potential upside of 15.11% from the company’s current price.
The analysts wrote, “▪ GARS earned adjusted NII/share of $0.20 for 1Q19, a penny short of our estimate but also short of the $0.23/share quarterly dividend. Given what we expect will be continued pressure on asset quality and marks, we think this will further constrain portfolio growth and thus NII.
▪ Garrison’s previous non-accrual, Profusion, was restructured at prior quarter marks (25% of cost) but Emtec and Confluence were added. This served to bring non-accruals at cost up to $17.0mm or 3.5% of the portfolio from $9.2m or 2.0% of the portfolio the prior quarter.
▪ Non-accruals in total are marked at 80% of cost, which we find to be generous, and we expect further write-downs on these assets as well. Cochon was marked down further to 41% of cost from 44% of cost Q/Q and we cannot fathom how an asset marked at 41% of cost can stay on accrual status. We think there are other shoes to drop.
▪ GARS has a regulatory D/E target of 1.75x and ended 1Q19 at 1.70x. We think negative marks will push NAV/share down to $9.75 in 4Q19 from $10.44 in 1Q19 and as a result constrain portfolio growth, with D/E already redlining. This really puts GARS against the wall, as we see it, and we do not expect NII to cover the dividend.
▪ GARS would rather undertake low-yielding BSL and club deals instead of repurchasing shares which is not prudent capital management and is not in the best interest of shareholders, as we see it, with the latter providing superior ROIC.
▪ We are revising our 2019 adjusted NII/share estimate to $0.86 from $0.89 and our 2020 adjusted NII/share estimate to $0.87 from $0.96.”
Several other brokerages also recently weighed in on GARS. Zacks Investment Research downgraded shares of Garrison Capital from a “buy” rating to a “hold” rating in a research note on Monday, March 11th. TheStreet downgraded shares of Garrison Capital from a “c” rating to a “d+” rating in a research note on Monday, April 22nd. Finally, ValuEngine downgraded shares of Garrison Capital from a “sell” rating to a “strong sell” rating in a research note on Monday, April 1st. Three research analysts have rated the stock with a hold rating and one has assigned a buy rating to the company’s stock. The company currently has a consensus rating of “Hold” and an average target price of $9.33.
Garrison Capital (NASDAQ:GARS) last released its quarterly earnings data on Tuesday, May 7th. The investment management company reported $0.20 earnings per share (EPS) for the quarter, missing the Zacks’ consensus estimate of $0.21 by ($0.01). Garrison Capital had a negative net margin of 3.06% and a positive return on equity of 8.29%. The business had revenue of $10.23 million for the quarter, compared to the consensus estimate of $10.75 million. On average, equities analysts predict that Garrison Capital will post 0.89 earnings per share for the current year.
In other news, CEO Joseph Bertrand Tansey bought 23,716 shares of the stock in a transaction on Wednesday, March 13th. The stock was bought at an average cost of $7.46 per share, for a total transaction of $176,921.36. Following the completion of the purchase, the chief executive officer now directly owns 136,412 shares in the company, valued at $1,017,633.52. The acquisition was disclosed in a legal filing with the Securities & Exchange Commission, which can be accessed through this link. Also, COO Brian S. Chase bought 11,900 shares of the stock in a transaction on Monday, March 11th. The stock was purchased at an average price of $7.47 per share, with a total value of $88,893.00. Following the completion of the purchase, the chief operating officer now owns 67,135 shares of the company’s stock, valued at $501,498.45. The disclosure for this purchase can be found here. Over the last 90 days, insiders acquired 67,632 shares of company stock valued at $504,202. 6.40% of the stock is owned by insiders.
A number of institutional investors and hedge funds have recently made changes to their positions in the business. Squarepoint Ops LLC purchased a new position in shares of Garrison Capital in the fourth quarter worth $76,000. National Asset Management Inc. raised its holdings in shares of Garrison Capital by 24.8% in the fourth quarter. National Asset Management Inc. now owns 18,603 shares of the investment management company’s stock worth $120,000 after buying an additional 3,700 shares during the last quarter. Wells Fargo & Company MN raised its holdings in shares of Garrison Capital by 102.6% in the first quarter. Wells Fargo & Company MN now owns 20,799 shares of the investment management company’s stock worth $150,000 after buying an additional 10,534 shares during the last quarter. JPMorgan Chase & Co. raised its holdings in shares of Garrison Capital by 68.1% in the first quarter. JPMorgan Chase & Co. now owns 23,675 shares of the investment management company’s stock worth $170,000 after buying an additional 9,587 shares during the last quarter. Finally, Oppenheimer & Co. Inc. raised its holdings in shares of Garrison Capital by 18.9% in the fourth quarter. Oppenheimer & Co. Inc. now owns 24,526 shares of the investment management company’s stock worth $158,000 after buying an additional 3,901 shares during the last quarter. Institutional investors own 26.93% of the company’s stock.
About Garrison Capital
Garrison Capital Inc is a business development company specializing in investments primarily in the debt and equity of middle market companies. It seeks to invest in first lien senior secured loans, second lien senior secured loans, one-stop senior secured or unitranche loans, subordinated or mezzanine loans, unsecured consumer loans and to a lesser extent, selected equity co-investments in middle-market companies, warrants and minority equity securities in United States middle-market companies.
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