FBR Capital Upgrades PennantPark Investment (PNNT) to Outperform

FBR Capital upgraded PennantPark Investment (NASDAQ: PNNT) from Market Perform to Outperform with a price target of $10.40.

Analyst Scott Valentin commented, "We are upgrading our investment rating on shares of PennantPark Investment Corporation (PNNT) to Outperform (from Market Perform) and reiterate our $10.40 price target following the release of 2Q(Mar)15 earnings to reflect an attractive risk/reward relationship. Key takeaways include (1) with plenty of liquidity ($480 million) and limited leverage (leverage ex-cash of 66%; 46% excluding SBC debt), management has plenty of capacity to add new investments, thus sustaining the dividend; (2) we believe further downside from exposure to energy credits is limited (little NAV benefit from recent oil price rally); and 3) management's intent to repurchase shares should provide incremental support for the shares and is accretive to NAV at current share price levels. We view PNNT's current valuation as attractive (0.9x 2Q[Mar]15 book value and ~12% dividend yield). We believe downside is limited by the stable dividend, providing an attractive yield—if NAV were to decline due to energy exposure, then we believe the dividend yield would provide support. If NAV declines due to widening credit spreads, we would expect management to use its ample liquidity and balance sheet capacity to grow the portfolio and drive the dividend higher."

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

Shares of PennantPark Investment closed at $9.37 yesterday.

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