Kayne Anderson Energy Development Company
has seen its earnings estimate for fiscal 2012 surge 42% over the last 30 days based on its strong fundamentals. Further, shares of this non-diversified closed-end management investment company have gained nearly 39% in a year's time. The company became a Zacks #1 Rank (Strong Buy) on August 30 and is currently trading near its 52-week high of $25.99.
Fiscal 2Q Results and Guidance
On July 24, Kayne Anderson reported second quarter fiscal 2012 net investment income of $0.04 million compared with $1.9 million in the prior-year quarter. Results deteriorated on the back of the decline in total investment income and higher expenses. However, net distributable income increased 10% year over year to 45 cents per share.
Total investment income came in at $2.5 million, down 53% from $5.3 million in the year-ago quarter. Total expenses were $2.4 million, up slightly from $2.3 million in the prior-year quarter, reflecting higher investment management fees. Further, as of May 31, 2012, the company's net asset value stood at $22.68 per share compared with $22.85 in the year-ago quarter.
As per Kayne Andersons' guidance, its portfolio is expected to generate dividends, distributions and interest income of about $6.9 million in the third quarter of fiscal 2012. Moreover, for the third quarter, the company anticipates net distributable income between 44 and 45 cents per share.
In addition, Kayne Anderson has provided an updated outlook for certain expenses for the subsequent quarters. The company expects management fees to be roughly $1.44 million and other operating expenses to be approximately $0.40 million. Likewise, interest expense is anticipated to be nearly $0.46 million based on $82.5 million borrowed under the company's credit facility.
Estimates Show Remarkable Jump
Over the last 30 days, the Zacks Consensus Estimate for fiscal 2012 has surged 42% to $1.11 per share with 1 out of 2 estimates revised upward. This implies year-over-year growth of 344%.
For fiscal 2013, the Zacks Consensus Estimate is $2.38, up 22% from just 30 days ago. This represents annual EPS growth of 114%.
Shares of Kayne Anderson currently trade at 23.2x 12-month forward earnings, a 128% premium to the peer group average of 10.2x. Its price to book ratio of 1.1 is a premium to the peer group median of 1.0. Given its strong fundamentals, the premium valuation is justified.
Chart Shows Strength
The stock has been continuously above its 200 day moving average over the last year:
Based in Maryland, Kayne Anderson is largely engaged in providing finance to energy-related companies. The company's operations are externally managed and advised by its investment adviser - KA Fund Advisors, LLC. The company primarily focuses on both debt and equity investments in Midstream, Upstream and Other Energy Companies (public and private). It has a market cap of approximately $267 million.