Barclays 'Little Concerned' With Prospect Capital's Core Earnings Run Rate

Barclays is "little concerned" with Prospect Capital Corporation PSEC's core earnings run rate, excluding one-off items, as it reiterated its Equal-Weight rating on the stock following the online lender's Q4 results.

Prospect Capital reported net investment income of $0.26 a share, which was higher than Barclays' estimate ($0.24) and consensus ($0.25). But net investment income also benefitted from some abnormally high one-timers from the sale of Harbortouch.

The sale generated advisory fees and prepayment income that contributed about $0.04 a share to the quarter, so excluding those fees, NII per share would have been $0.22.

The company has roughly $800 million of loans from its online lending business. However, Prospect Capital expects a decline in value of its online lending portfolio on potential rise in delinquencies and NCOs.

Meanwhile, the sale of Harbortouch generated total proceeds of $328 million, which included roughly $13 million of advisory fees and an additional $5 million of prepayment income that boosted income for the quarter.

"Clearly there is some dry powder to redeploy into new earning assets. But based on our estimates, new assets would need a yield at amortized cost of ~12.3% to meet the required return (@ NAV), while most assets originated this past quarter were below that mark," analyst Mark DeVries wrote in a note.

At time of writing, shares of Prospect Capital were down 0.58 percent to $8.60. DeVries has a price target of $7.