Alaris Equity Partners Income 6 25 Senior Unsecured Debentures T.AD.DB.A

Alternate Symbol(s): T.AD.UN | ADLRF

Financial Services Asset Management

Alaris Equity Partners Income Trust (the Trust) is a Canada-based trust. The Trust’s operations consist of investments in private operating entities, typically in the form of preferred or common limited partnership interests, preferred or common interest in limited liability corporations in the United States, and loans receivable. The Trust’s Canadian investments are made through a wholly owned Canadian corporation, Alaris Equity Partners Inc. and its American investments are made through two Delaware corporations, Alaris Equity Partners USA Inc., Salaris USA Royalty Inc., and their subsidiaries.

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Alaris Equity Partners Income 6 25 Senior Unsecured Debentures

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Post by retiredcfon Nov 10, 2022 9:24am

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Post# 35087934

RBC

November 10,2022

Alaris Equity Partners Income Trust
Q3/22 normalized EBITDA was ahead of our forecast. 3% distribution increase announced

TSX: AD-U | CAD 16.16 | Sector Perform | Price Target CAD 18.00

Sentiment: Positive

Our initial take: Q3/22 normalized EBITDA of $37.7MM was ahead of our $34.3MM forecast and $34.2MM consensus (range of $33.8MM to $34.7MM). Of note, we backed out $10.8MM of F/X gains, $7.1MM from investment fair value losses and $1.5M of transaction costs from Alaris’ reported EBITDA of $39.9MM. The variance from our forecast was primarily driven by higher-than- forecast distribution income and slightly lower-than-forecast SG&A expense.

Alaris provided distribution reset guidance for 2023 and expects a positive reset of +3.1%, higher than our +2% forecast, which would result in $4.5MM of incremental distribution income revenue.

On November 8, Alaris made a US$24MM investment in Sagamore Plumbing and Heating, LLC, of which US$20MM were for preferred shares with a 15% annualized pre-tax yield (US$3.0MM annualized distribution) and US$4MM were for a minority equity stake.

Alaris increased its annualized distribution +3% to $1.36/unit from $1.32/unit. Other key financial metrics:

• Operating cashflow before working capital/unit:
• Book value/unit: $19.57 was below our forecast of $20.78.
• Leverage (funded debt to contracted EBITDA): 2.0x was slightly higher Q/Q vs. 1.9x in Q2/22.
• Earnings coverage ratio (ECR): Alaris estimates its weighted average ECR to be >1.75x for the portfolio vs. ~2.1x Q/Q.