Definitive Healthcare Corp T.DH.R

RBC

[retiredcf]

May 2, 2016

DH Corporation

Widespread and significant insider buying positive in our view

Impact: Positive

First impression

Based on current filings, seven insiders purchased ~54K shares for a total cost of $1.7MM in the immediate aftermath of the -13.4% share price decline since the company reported Q1/16 last week (see Exhibit 1 on page 2 for full details). We view this as a very positive sign that the share price sell-off was overdone and that DH’s positive fundamental outlook remains unchanged. It is unclear whether there is more insider buying activity to come. Combined with the insider buying post Q3/15 results, insiders have purchased close to $4MM of DH shares.

Valuation is attractive in our view, as we believe the significant valuation discount to U.S. peers is unwarranted and our positive fundamental outlook remains unchanged. DH trades at 11.9x our 2017 forecast EPS compared to 19.7x for FISV and 15.2x for FIS (see Exhibit 2 on page 3). In addition, DH has an almost 4% dividend yield compared to 0.0% for FISV and 1.6% for FIS.

DH remains one of our best ideas, reflecting: an attractive FinTech play exposed to a recovery in U.S. bank capex spending; ~60% exposure to higher-growth countries outside of Canada, primarily the U.S.; and a significant valuation discount to U.S. peers.

Sector: Diversified Financials

Outperform

TSX: DH
Price: CAD 32.57
All values in CAD unless otherwise noted.