Scotia Review $13.00 TargetRating Sector Perform
1-Yr. Target C$13.00
AD.UN-T C$10.50
1-Yr. Return 35.6%
Div. (NTM) $1.24 Div. (Curr.) $1.24
Yield (Curr.) 11.8%
Alaris Provides A Corporate Update With Some Positive Developments
OUR TAKE: Positive. Alaris issued a press release this morning providing a corporate update that saw a number of positive developments. Some of these include: 1) earlierthan-expected recovery at Kimco; 2) continued operating momentum at BCC; 3) continued recovery at Planet Fitness; and 4) double-digit increase to the annual distribution in 2021E for LMS. AD's continues to demonstrate the resiliency of its investment portfolio amid a very challenging economic landscape. While management believes it may have likely been too aggressive on its initial cuts to its book value and dividend in May, the revisions have likely provided Alaris with ample room for growth moving forward, especially given what management believes is a very robust environment for capital deployment opportunities. These developments provide some much needed positive news for the stock that had sold off significantly over the past couple of weeks since acknowledging the complaint lodged against it for ~US$37.2M for alleged potential fraud and breach of representations as part of its Sandbox sale. Management believes these claims are without merit and intends to vigorously defend the case. Maintaining $13.00 target price and SP rating. Kimco restarted its distributions at US$100K per month in July and August, and increased it to US$200K per month in September, as it continues to see increased revenue from additional cleaning and sanitization work. AD and Kimco agreed to a cash flow sweep to accelerate the repayment of its outstanding distributions, which will see Alaris receive an additional payment of US$500K in Q3 and Q4, each. BCC has seen strong financial and operating results since reopening, allowing the company to pay its US$1.7M distribution in Q3, with the expectation that all previously deferred Q2 distributions will be repaid in the coming six months. Results continue to be strong for PFGP, with all 67 clubs now open. Alaris and PFGP will discuss how the deferred distributions will be caught up once regular payments begin. AD also provided a preliminary estimate for Q3/20 revenue of $23.5M, which is expected to rise roughly 16% sequentially. As a result, we have made some forecast revisions to reflect the recent corporate developments.