Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 13 Dec, 24 | BCSF | Buy | USD 17.29 | USD 18.85 | USD 20.23 | 37 days | 17.0% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Bain Capital Specialty Finance, Inc. is business development company specializing in direct loans to middle-market companies. The fund seeks to invest in senior investments with a first or second lien on collateral, senior first lien, stretch senior, senior second lien, unitranche, mezzanine debt, junior securities, other junior investments, and secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. It typically invests in companies with EBITDA between $10 million and $150 million.
Portfolio Growth: The total fair value of investments rose to $2,408.0 million as of September 30, 2024, compared to $2,237.5 million at the end of the prior quarter, indicating expansion in the investment portfolio.
Net Investment Income (NII) Growth: The company reported an increase in net investment income (NII) per share to $0.53 in Q3 2024, up from $0.51 in Q2 2024, reflecting continued profitability and operational efficiency.
Debt-to-Equity Increase: The net debt-to-equity ratio increased to 1.09x as of September 30, 2024, from 0.95x at the end of the previous quarter, indicating higher leverage levels.
Non-Accrual Investments: The percentage of investments on non-accrual status represented 1.9% at amortized cost and 1.1% at fair value, signaling a small but notable credit quality concern.
Key investment risks for the company include the potential impact of rising leverage levels on financial flexibility, credit quality concerns due to non-accrual investments, and exposure to interest rate fluctuations affecting its predominantly floating-rate debt portfolio.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 17.29 | 15.04 | 18.85 | 20.23 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Quarterly Financial Performance
The company reported net investment income (NII) per share of $0.53 for the third quarter of 2024, representing an annualized NII yield on book value of 11.9%. Net income per share was $0.51, equating to an annualized return on book value of 11.5%. The net asset value (NAV) per share as of September 30, 2024, stood at $17.76, a slight increase from $17.70 at the end of the previous quarter. Total investment income during the quarter reached $72.5 million, while total expenses (before taxes) amounted to $37.5 million. Net investment income was $34.0 million, or $0.53 per share, reflecting an improvement from $33.1 million, or $0.51 per share, in the prior quarter.
Portfolio and Investment Activity
During the quarter, the company invested $413.1 million across 83 portfolio companies, including $330.9 million in 16 new companies and $82.2 million in 67 existing companies. Principal repayments and sales totaled $248.0 million, resulting in net investment fundings of $165.1 million. As of September 30, 2024, the company’s investment portfolio had a total fair value of $2,408.0 million, comprising investments in 159 portfolio companies operating across 31 industries. The portfolio predominantly consisted of first lien senior secured loans, representing 63.2% of the total fair value, followed by equity interests (9.1%) and preferred equity (7.1%).
Credit Quality and Non-Accrual Investments
The company reported investments on non-accrual status at 1.9% and 1.1% of the total investment portfolio at amortized cost and fair value, respectively. The weighted average yield on the investment portfolio was 12.1% at both amortized cost and fair value as of September 30, 2024, down slightly from 13.1% and 13.2%, respectively, at the end of the previous quarter. Approximately 90.8% of the company’s debt investments at fair value were in floating rate securities, offering some protection against interest rate fluctuations.
Segment Highlights: ISLP and SLP Portfolios
The company’s ISLP portfolio had an aggregate fair value of $691.7 million, comprising investments in 37 portfolio companies across 15 industries. The ISLP portfolio was composed predominantly of first lien senior secured loans (95.1%) and equity interests (4.2%). Similarly, the SLP portfolio had a fair value of $1,132.9 million, representing investments in 85 portfolio companies across 26 industries. The SLP portfolio largely consisted of first lien senior secured loans (98.4%) with minimal exposure to equity interests (0.2%).
Capital Structure and Liquidity
As of September 30, 2024, the company had total principal debt outstanding of $1,306.2 million, including $353.7 million under its Sumitomo Credit Facility and $600 million in senior unsecured notes due in 2026. The weighted average interest rate on outstanding debt was stable at 5.1% during the quarter. The company’s debt-to-equity and net debt-to-equity ratios were 1.14x and 1.09x, respectively, compared to 1.03x and 0.95x at the end of the prior quarter. Liquidity remained robust, with cash and cash equivalents of $30.5 million, restricted cash of $29.3 million, and $501.3 million in undrawn capacity under the Sumitomo Credit Facility.
Dividend and Shareholder Returns
Subsequent to the quarter’s end, the Board of Directors declared a dividend of $0.42 per share for the fourth quarter of 2024, payable to stockholders of record as of December 31, 2024. Additionally, the Board announced an extra dividend of $0.03 per share, also payable to stockholders of record as of December 31, 2024. These dividends reflect the company’s commitment to delivering consistent returns to shareholders while maintaining financial discipline and a strong operational performance.
Considering fundamental performance, recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on the Bain Capital Specialty Finance (NYSE: BCSF) at the closing price of USD 17.29, as on December 12, 2024.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Financial Services Industry: Asset Management
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| BCSF Bain Capital Specialty Finance Inc |
0.07 0.42% | 16.67 | 8.72 | 10.38 | 3.89 | 0.98 | 16.52 | 21.91 |
| BX Blackstone Group Inc |
2.27 1.63% | 142.06 | 63.48 | 31.95 | 20.18 | 20.26 | 16.48 | |
| BLK BlackRock Inc |
0.52 0.05% | 947.00 | 23.92 | 21.23 | 8.04 | 3.78 | 7.54 | 16.86 |
| APO Apollo Global Management LLC Class A |
0.54 0.39% | 137.48 | 18.23 | 20.92 | 3.08 | 6.11 | 2.73 | 14.76 |
| KKR KKR & Co LP |
1.50 1.30% | 117.11 | 29.90 | 16.84 | 4.76 | 3.56 | 2.50 | 4.66 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is December 12, 2024. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer :
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