UBS has made an upward adjustment to its price target for PennantPark Floating Rate (PFLT, Financial), increasing it from $10.50 to $10.75. Despite this change, UBS maintains a Neutral rating on the stock. This adjustment reflects the firm's updated outlook on PFLT, providing investors with a slightly higher valuation expectation.
PFLT Key Business Developments
Release Date: May 13, 2025
- Core Net Investment Income: $0.28 per share; adjusted for additional shares, $0.30 per share.
- Portfolio Growth: Grew to $2.3 billion, up 7% from the prior quarter.
- New Investments: $293 million invested in three new and 54 existing portfolio companies at a weighted average yield of 9.9%.
- Net Asset Value (NAV): $11.07 per share, down 2.4% from $11.34 per share last quarter.
- Debt-to-Equity Ratio: 1.3 times as of March 31.
- Weighted Average Yield on Debt Investments: 10.5%.
- Nonaccruals: Represent 2.2% of the portfolio at cost and 1.2% at market value; pro forma nonaccruals represent 1% at cost and 0.5% at market value.
- PIK Income: 3% of total interest income.
- Operating Expenses: Interest and expenses on debt were $23 million; base management and performance-based incentive fees were $11.9 million; general and administrative expenses were $1.85 million.
- Net Realized and Unrealized Change on Investments: Loss of $23.8 million.
- Portfolio Composition: 90% first lien senior secured debt, less than 1% subordinated debt, 3% equity of PSSL, 7% other equity.
- Debt-to-EBITDA Ratio: 4.2 times.
- Interest Coverage: 2.3 times.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PennantPark Floating Rate Capital Ltd (PFLT, Financial) reported a solid quarter despite market volatility, with a focus on supporting existing portfolio companies and private equity borrowers.
- Approximately 80% of originations came from existing borrowers, showcasing strong relationships and origination capabilities.
- The portfolio's weighted average yield on debt investments was 10.5%, with 100% of the debt portfolio being floating rate, which is beneficial in a rising interest rate environment.
- PFLT has taken significant steps to strengthen its balance sheet, increasing total leverage capacity by $750 million through various financing activities.
- The company has a diversified portfolio across 159 companies and 49 industries, with a focus on sectors that are recession resilient and generate strong free cash flow.
Negative Points
- Net realized and unrealized change on investments resulted in a loss of $23.8 million for the quarter ended March 31.
- The net asset value (NAV) per share decreased by 2.4% from the previous quarter, down to $11.07.
- Three new investments were added to nonaccrual status during the quarter, representing 2.2% of the portfolio at cost.
- Market uncertainty, particularly related to tariffs, has slowed down new M&A activity, impacting the deployment of capital.
- Despite a robust capital raise, the company is still underlevered with a debt-to-equity ratio of 1.3 times, below the target leverage of 1.5 times.
