Owl Rock Capital: Third Straight Quarter Of Outperformance For This 11.5% - Yielding BDC

seekingalpha2023-06-14

Darren415This article was first released to Systematic Income subscribers and free trials on June 6. In this article we take a look at the Business Development Company Owl Rock Capital Corporation (...

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In this article we take a look at the Business Development Company Owl Rock Capital Corporation (...</p>\n\n<a href=\"https://seekingalpha.com/article/4611240-owl-rock-capital-orcc-stock-third-straight-quarter-of-outperformance\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4148","symbol_name":"电子元件","start_time":0,"source_url":"https://seekingalpha.com/article/4611240-owl-rock-capital-orcc-stock-third-straight-quarter-of-outperformance","article_id":"2343204306","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1348229414/image_1348229414.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2343204306","pubTimestamp":1686674888,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Darren415This article was first released to Systematic Income subscribers and free trials on June 6. In this article we take a look at the Business Development Company Owl Rock Capital Corporation (NY","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4148":"电子元件","BK4135":"资产管理与托管银行","BDC":"百通公司"},"translate_title":"Owl Rock Capital：收益率为11.5%的BDC连续第三个季度表现优异","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BDC":1,"ORCC":1},"content_text":"Darren415This article was first released to Systematic Income subscribers and free trials on June 6. In this article we take a look at the Business Development Company Owl Rock Capital Corporation (NYSE:ORCC). The company has extended its terrific run of performance with a +3.6% total NAV return in Q1. Over the past year the company delivered a +10.2% total NAV return, outperforming the median BDC in our coverage by 4.3% (i.e. 10.2% vs 5.9% median 1Y total NAV return). This run of outperformance alongside a below-average valuation is one reason why we initiated a position in ORCC earlier in the year. We would look to add to it on further valuation cheapening. Quarter Update Net income rose to $0.45 - a 10% increase from the prior quarter and a new record for the company.   Systematic Income BDC ToolORCC declared the same base dividend of $0.33 and a formulaic $0.06 special dividend for a total of $0.39. Total dividend coverage stands at 117%. The company's net income price yield of 13.33% is slightly below the sector average of 13.5%. The NAV rose by 1.1% - well above the 0.1% median for the sector. The rise was due to both retained income and a mark-up in portfolio holdings from 97% to 97.6%.   ORCCThe company has repurchased $49m as of early May out of the previously announced $150m share repurchase plan. The total amount repurchased including shares bought by the Blue Owl employee investment vehicle was $74m at an average price of $12.22. This works out to a nearly 20% discount on NAV and 11% below the price as of this writing. The buybacks are attractive as they are both accretive to the NAV and a shareholder-friendly act by management. Income Dynamics Net new investments were slightly up as overall funded activity was very modest. This is a direct function of a low level of repayment activity.   Systematic Income BDC ToolReaders may recall our concern that BDCs were not going to be able to fully take advantage of banks potentially stepping away from corporate lending because an environment of reduced bank lending would also be one of reduced prepayments. So unless BDCs were ready to lift leverage significantly higher they were not going to be in position to fully step into bank shoes. This seems to be playing out, not just for ORCC, but for the broader sector also.   ORCCLeverage was not much changed at 1.21x, pretty much in line with the sector median level of 1.19x. Current leverage is close to the top end of the 0.9-1.25x target range which suggests limited further net income upside in this respect.   Systematic Income BDC ToolPortfolio yield ticked up by 0.5% while interest expense increased by the same amount. Net net this is a gain for overall net income as a bit less than half of the fund's total assets are unleveraged. Both metrics are below the sector median level while the yield spread of 6.3% is a touch above the sector median level.   Systematic Income BDC ToolPortfolio Quality There were only two names on non-accrual at the end of the quarter, equating to just 0.3% on fair-value - well below the 2.3% median figure in the sector.   Systematic Income BDC ToolPortfolio quality as gauged by internal ratings has been pretty stable.   Systematic Income BDC ToolRealized losses came in at -0.9%, a metric that bears watching.   Systematic Income BDC ToolManagement said that they do not see any early signs of challenges across the portfolio borrower base. Specifically, revenue and EBITDA are increasing though at a slower pace than before. Interest coverage was 2.2x at quarter-end and is expected to fall to 1.5x by the end of Q2. Valuation and Returns The company's valuation has been volatile over the last three years, ranging from around 105% all the way down to 70%.   Systematic IncomeValuation has traded consistently cheaper to the sector (i.e. below zero in the chart below) since around 2021.   Systematic IncomeIts 3Y total NAV return is fairly respectable being in the middle of the pack.   Systematic IncomeThe company's performance has not been very consistent - it underperformed through 2021, but has recently begun to outperform once again.   Systematic Income BDC ToolOverall, this combination of average longer-term performance, below-average valuation and recent outperformance (in an increasingly challenging credit environment) makes the stock attractive in our view. Stance and Takeaways Our only two trades involving ORCC were two rotations made into the stock this year, both from BXSL. The chart below shows that both happened when ORCC traded at a valuation in the low 80s.   Systematic IncomeIn terms of valuation differential to the sector, the rotations were done when ORCC traded at discounts of 8% and 7% to the sector average valuation. This valuation differential has since compressed to about 5%.   Systematic IncomeIf we look at the ORCC/BXSL valuation differential, the chart below shows that we rotated from BXSL to ORCC when BXSL traded at around a 15% higher valuation than ORCC, something which looked too wide in our view.   Systematic IncomeFinally, if we plot total returns from our initial rotation we see that ORCC is ahead by around 8% since then (the total returns are normalized to 100 at the time of the rotation for clarity).   Systematic IncomeIn terms of total NAV returns, BXSL is slightly ahead of ORCC over the past year.   Systematic Income BDC ToolHowever, ORCC has outperformed for three quarters in a row.   Systematic Income BDC Tool In our view, ORCC is no longer particularly cheap so we view it as a Hold. If its valuation differential opens up to 10% or more below the sector average, we will consider adding to the position.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2343204306"}