PennantPark Floating Rate Capital: Undervalued Floating-Rate Credit

Initiating with a Buy, $13 PT; PFLT invests institutional capital in senior-secured, floating-rate

exposures across US mid-market loans, delivering yield at the defensive end of private credit. Where the market is content to discount the sector on cyclical default risk and opaque valuations, the gap between consensus and fundamentals is widest: stabilizing non-accrual exposure and 90% first-lien composition support credit quality just as unutilized borrowing capacity and $350 mn of committed JV capital position the firm to ramp toward management’s 1.5x leverage target and related step-up in quarterly EPS potential. Our updated model puts our FY26E EPS 12% above the Market (dividend per share of $1.32), grounded in management’s transparent guidance and real-time visibility on deployment pace and spread expansion (new originations consistently pricing at SOFR + 500-550 bps). To discount PFLT near 8.4x forward, you must discount the resilience of a disciplined capital stack and NIM anchored in the sweet spot of floating-rate exposure in a “higher for longer” paradigm. We view that as mispriced: applying a 9.5x target multiple still embeds a cushion for recession and modest convergence toward peers, implying 19% total equity upside from today’s $10.55 share price. The risk of delayed deployment or a credit event due to recession tempers our thesis but does not offset that with sticky base rates and active credit selection, the R/R skews to the upside. We expect consensus to close on fundamentals and see the gap as too wide to ignore.

## Markets Demand Resilience