Stellus Capital Investment (US:SCM)2021-05-07 18:28Financial Data and Key Metrics Changes - For Q1 2021, the company reported GAAP net investment income of $0.26 per share, covering the dividend of $0.25 per share, with core net investment income at $0.28 per share [6][10] - Net asset value per share remained stable at $14.03 [6] - The investment portfolio at fair value increased to $714.5 million from $653 million at year-end, with a growth of approximately $60 million for the quarter [10][12] Business Line Data and Key Metrics Changes - The company funded $93 million in new investments during the quarter, with $33.6 million in repayments, resulting in a net increase in the portfolio [10] - The portfolio is heavily weighted towards secured lending, with 95% of loans secured and 93% at floating rates [11] - 86% of the loan portfolio consists of first lien or unit tranche loans, indicating a focus on lower-risk investments [11] Market Data and Key Metrics Changes - The company has identified potential fundings of approximately $75 million that could be executed by the end of the current quarter [13] - The company continues to see an increase in investment opportunities, with a solid pipeline of actionable investments [13] Company Strategy and Development Direction - The company has maintained a stable asset quality rating, with 17% of the portfolio rated ahead of plan and only 8% rated below plan [12] - The investment strategy focuses on maintaining a high percentage of first lien investments, which is expected to remain the norm moving forward [40][42] - The company is leveraging its SBIC licenses to draw low-cost debentures, enhancing its capital structure [7][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of asset quality and the ability to cover dividends, indicating a positive outlook for the upcoming quarters [5][6] - The company anticipates a robust second quarter, driven by increased activity and a strong pipeline of investments [32][34] Other Important Information - Since its IPO in November 2012, the company has invested approximately $1.7 billion across over 135 companies, with a total of $164 million in dividends paid to investors [9] - The company completed a $100 million institutional bond offering to refinance existing debt and strengthen its balance sheet [6][10] Q&A Session Summary Question: What will the company do with excess cash in the second quarter? - Management indicated that most of the cash will be reinvested through SBIC licenses, with expectations to fully invest by June 30 [20] Question: What is the outlook for Grupo HIMA, which has non-accrual investments? - Management acknowledged the troubled situation with Grupo HIMA but noted that it represents a small position in the overall portfolio [22] Question: Is the non-accrual status of a commercializing company due to COVID-related issues? - Management clarified that the non-accrual status is more related to structural issues rather than COVID, and they expect to resolve it positively [28] Question: How has the portfolio construction changed over the years? - Management confirmed that the current focus on first lien debt investments is part of their long-term strategy and is not expected to change significantly [40][42] Question: What are the company's targets for leverage post-COVID? - Management reiterated targets of one-to-one regulatory leverage and up to two-to-one total leverage, with potential for slight increases due to the nature of the portfolio [44]