Stellus Capital Investment (US:SCM)2023-03-01 19:49Financial Data and Key Metrics Changes - Core net investment income was $1.38 per share and GAAP net investment income was $1.46 per share for Q4 2022, with total distributions of $0.34 per share covered through core net investment income of $0.44 per share [5][22] - For fiscal year 2022, realized income was $1.65 per share, exceeding the dividend of $1.30 per share [21] - Net asset value decreased by $9.3 million year-over-year, primarily due to portfolio company-specific issues [5] Business Line Data and Key Metrics Changes - The investment portfolio at fair value increased to $845 million across 85 portfolio companies, up from $773 million across 73 companies as of December 31, 2021 [6] - The average loan per company is $10.8 million, with 83 of the 85 portfolio companies backed by a private equity firm [7] - 99% of loans were secured and 97% were priced at floating rates, with first lien loans comprising 87% of the loan portfolio [24] Market Data and Key Metrics Changes - The company invested $211 million in 22 new and 28 existing portfolio companies during 2022, with repayments of $90 million resulting in net portfolio growth of $90.8 million [6] - The company expects to maintain its investment portfolio between $850 million and $900 million throughout 2023 [9] Company Strategy and Development Direction - The strategy includes modest investments in the equity of portfolio companies to generate realized gains sufficient to offset losses over time [8] - The company aims to remain active in the market and invest in larger transactions, supported by total assets under management of approximately $2.8 billion [26] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are headwinds in the economy, there has not been a significant downturn, and they expect to remain active in M&A activities [68] - The company anticipates higher earnings in the first and second quarters due to rising interest rates, with LIBOR expected to exceed 5% [41][68] Other Important Information - The regular dividend was increased by 43% from $0.28 per share to $0.40 per share, reflecting greater earnings in the higher interest rate environment [25] - The company has a spillover income of over $28 million, which supports the current dividend level [31] Q&A Session Summary Question: Any increase in amendment requests from portfolio companies? - Management indicated that there has not been a significant increase in amendment requests, and they believe they have a good way to run before higher rates impact portfolio companies [30] Question: Expectations for realized gains and dividend sustainability? - Management expects realized gains to be modest but meaningful, covering potential losses and supporting dividends [35][36] Question: Broader economic view guiding investment decisions? - Management expressed caution regarding inflation and interest rates but remains positive about M&A activity and investment opportunities [68][80]