Wells Fargo Downgrades Apollo Investment (AINV) to Market Perform on Rising Risks

February 7, 2013 8:20 AM EST Send to a Friend
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Price: $8.22 -0.72%

Rating Summary:
    8 Buy, 6 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 13 | Down: 18 | New: 41
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Wells Fargo downgraded Apollo Investment (NASDAQ: AINV) from Outperform to Market Perform with an $8.50-49 valuation range citing elevated risks.

The firm comments, "We are downgrading shares to Market Perform as both credit/market risks elevate. Recall, AINV has focused on increasing portfolio yield by investing more complex/esoteric "structured products" including CLOs/Aircraft leasing. Based on the potential for increasing credit risk associated with those investments as well as the stock trading near our $8.50-9.00 valuation range, we believe the share price currently reflects intrinsic value. Based on AINV’s rank in the BDC scorecard (Quartile 3), we estimate AINV shares will trade at a 9.2-9.7% yield on our 2013 NOI estimate of $0.83. In addition, we believe AINV’s P/NAV will likely remain constrained until management institutes a high water mark to protect investors from paying an outperformance fee to the external manager even when they generate investment losses (as they did with their investment in Cengage this quarter). Based on FQ3 2013 results, we are lowering our 2014 NOI estimates slightly to $0.84 from $0.87 to account for potential credit risks associated with select education investments."

For an analyst ratings summary and ratings history on Apollo Investment click here. For more ratings news on Apollo Investment click here.

Shares of Apollo Investment closed at $8.39 yesterday.


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