Raymond James analyst raises PT In response to a number of recent corporate announcements that she deems positive for 2018 earnings, Raymond James analyst Brenna Phelan raised her target for shares of Alaris Royalty Corp. (AD-T).
“Alaris’ investment portfolio has recently featured an elevated number of investments that have, to varying degrees, become impaired in their ability to make regularly scheduled distribution payments, pressuring operating cash flow and dividend coverage in the process,” she said. “To additionally cloud the outlook, recent management commentary suggests that the current ultra-competitive state of the market may make it challenging to invest capital productively over the near-to-medium term. The impact of recent corporate announcements, including deployment through Salaris, steps in resolution of KMH and reversal of Sequel’s partial redemption is positive to our 2018 EBITDA estimates and our target price increases commensurately. That said, we continue to believe that resolution of Alaris’ most material problematic investment, Group SM, to which exposure sits at $74-million will be required for Alaris’ valuation to improve meaningfully. Given the largely binary outcome of this situation, which is dependent on an arbitration decision, resolution is challenging to forecast.”
With a “market perform” rating, Ms. Phelan’s target jumped a loonie to $23. Consensus is $23.94.
“Our $23 target price is based on a target 2018 EV/EBITDA [enterprise value to earnings before interest, taxes, depreciation and amortization] multiple of 9.5 times, roughly in-line with its one-year average, and towards the low end of its five-year historical valuation range of 7.5–20.0 times to reflect a higher-than-usual level of investment risk and reduced dividend growth outlook versus historical levels,” she said.