Oaktree Specialty Lending (OCSL) Stock Rating Reaffirmed by National Securities

Oaktree Specialty Lending (NASDAQ:OCSL)‘s stock had its “neutral” rating reissued by equities research analysts at National Securities in a report issued on Monday. They currently have a $5.00 price target on the credit services provider’s stock. National Securities’ price target indicates a potential upside of 5.71% from the company’s current price.

The analysts wrote, “ Oaktree posted NII/share of $0.12 for F4Q18, up from $0.10 sequentially Q/Q and two cents above our estimate. The beat was largely attributable to higher prepayment-related income, including fees and acceleration of unamortized OID. The portfolio at cost decreased to $1.61 billion from $1.68 billion on the quarter but total investment income jumped to $38.2mm from $31.9mm Q/Q which is likely explained by the prepayment-related income.

 OCSL continues to make good progress on rotating out of the legacy Fifth Street portfolio. At 9/30/18, 76% of the book was defined as “core.” Of the non-core investments, there are $139mm of investments with $99mm on non-accrual status with an average mark of 47%.

 TransTrade Operators, with a cost of $23.3mm at 6/30/18, was exited and thus removed from non-accrual status during F4Q18 but Refac Optical Group, with a cost of $41.6mm, was added. The company remains optimistic about Refac’s prospects as the company is in advanced stages of refinancing (Oaktree will not be involved in the refinance). However, even backing out Refac, non-accruals at cost would be $184.2mm or 11.5% of the portfolio.

 We continue to expect the market to discount OCSL accordingly, as even performing but inherited loans from Fifth Street will be viewed with much deserved skepticism, in our opinion. We note that this is not in any way a knock on Oaktree, we just have absolutely no confidence in the legacy Fifth Street portfolio and wouldn’t be surprised if more credit issues pop up or existing ones are marked down further.

 We are revising our fiscal 2019 NII/share estimate to $0.45 from $0.44 and are rolling out our fiscal 2020 NII/share estimate of $0.47. We are maintaining our NEUTRAL rating and $5 price target.”

OCSL has been the subject of a number of other research reports. Zacks Investment Research lowered shares of Oaktree Specialty Lending from a “buy” rating to a “hold” rating in a research note on Saturday, October 13th. BMO Capital Markets lifted their price target on shares of Oaktree Specialty Lending from $4.00 to $5.00 and gave the stock a “market perform” rating in a research note on Friday, August 10th. Keefe, Bruyette & Woods upgraded shares of Oaktree Specialty Lending from a “market perform” rating to an “outperform” rating in a research note on Tuesday, August 21st. Finally, JPMorgan Chase & Co. boosted their target price on shares of Oaktree Specialty Lending from $5.00 to $5.50 and gave the company an “overweight” rating in a research note on Friday, August 10th. One equities research analyst has rated the stock with a sell rating, four have assigned a hold rating and three have issued a buy rating to the company’s stock. The company presently has a consensus rating of “Hold” and a consensus price target of $5.42.

Shares of NASDAQ:OCSL opened at $4.73 on Monday. The company has a debt-to-equity ratio of 0.46, a current ratio of 0.17 and a quick ratio of 0.17. The firm has a market capitalization of $670.97 million, a P/E ratio of 11.02, a P/E/G ratio of 5.21 and a beta of 0.29. Oaktree Specialty Lending has a 12-month low of $4.17 and a 12-month high of $5.16.

Oaktree Specialty Lending (NASDAQ:OCSL) last issued its quarterly earnings results on Thursday, November 29th. The credit services provider reported $0.12 earnings per share (EPS) for the quarter, topping analysts’ consensus estimates of $0.11 by $0.01. The business had revenue of $38.22 million during the quarter, compared to analyst estimates of $34.14 million. Oaktree Specialty Lending had a net margin of 33.71% and a return on equity of 7.18%. Equities research analysts predict that Oaktree Specialty Lending will post 0.46 earnings per share for the current year.

Several institutional investors and hedge funds have recently made changes to their positions in OCSL. Hilton Capital Management LLC boosted its holdings in shares of Oaktree Specialty Lending by 24.6% during the third quarter. Hilton Capital Management LLC now owns 3,957,659 shares of the credit services provider’s stock valued at $19,630,000 after acquiring an additional 780,594 shares during the period. Millennium Management LLC boosted its holdings in shares of Oaktree Specialty Lending by 63.1% during the second quarter. Millennium Management LLC now owns 1,145,485 shares of the credit services provider’s stock valued at $5,475,000 after acquiring an additional 443,222 shares during the period. Wells Fargo & Company MN boosted its holdings in shares of Oaktree Specialty Lending by 271.1% during the third quarter. Wells Fargo & Company MN now owns 385,027 shares of the credit services provider’s stock valued at $1,910,000 after acquiring an additional 281,281 shares during the period. River Road Asset Management LLC boosted its holdings in shares of Oaktree Specialty Lending by 4.0% during the third quarter. River Road Asset Management LLC now owns 6,969,793 shares of the credit services provider’s stock valued at $34,570,000 after acquiring an additional 270,487 shares during the period. Finally, Bruni J V & Co. Co. boosted its holdings in shares of Oaktree Specialty Lending by 10.6% during the second quarter. Bruni J V & Co. Co. now owns 2,171,618 shares of the credit services provider’s stock valued at $10,380,000 after acquiring an additional 208,008 shares during the period. 43.87% of the stock is owned by institutional investors.

About Oaktree Specialty Lending

Oaktree Specialty Lending Corporation is a business development company specializing in investments in middle market, bridge financing, first and second lien debt financing, mezzanine debt, senior and junior secured debt, expansions, sponsor-led acquisitions, and management buyouts in small and mid-sized companies.

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