TSX:DHT.UN - Post by User
Post by
retiredcfon Nov 15, 2023 10:50am
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Post# 35736771
RBC
RBCTheir upside scenario target is a double ($23.00). GLTA
Outperform
TSX: DHT-U; CAD 11.30
Price Target CAD 18.00
Results ahead of estimates; Orserdu outperforms & deal pipeline remains robust
Our view: Q3/23 revenue, cash receipts and adj. EBITDA were ahead of estimates. Total revenue of $34.1MM was above RBCe ($28.4MM) and consensus ($27.2MM). Adj. EBITDA of $20.3MM was ahead of RBCe ($18.1MM) but below consensus ($21.7MM). The near-term deal pipeline consists of 12 opportunities with potential deployment of ~$1.4B ($3B total). Three to four deals are near exclusivity and management expects to close on one or more of those transactions in the next 60-90 days which should serve as catalysts and support the shares.
Key points:
Royalty revenues ahead of estimates; Adj. EBITDA ahead of RBCe but below consensus. DRI reported total revenue (including interest income) of $34.1MM, ahead of RBCe ($28.4MM, including $1MM of milestone payments) and cons. ($27.2MM). Cash royalty receipts of $25.2MM were well ahead of RBCe ($21.6MM). Q3/23 adj. EBITDA of $20.3MM was stronger than RBCe ($18.1MM) but came light vs. cons. ($21.7MM).
Updates on the $3B deal pipeline. Management noted that the deal pipeline remains more robust than it has ever been with an estimated ~$3B in potential investment opportunities. The near-term deal pipeline consists of 12 opportunities with potential aggregate deployment of ~$1.4B. Three to four deals are near exclusivity and management expects to close on one or more of those transactions in the next 60-90 days. The deal size ranges between $35-250MM. Management noted that while there are increasing opportunities in the market, there are still significant barriers to entry.
Balance sheet, dividend and NCIB update. DRI ended Q3/23 with cash on hand of $28.2MM and had drawn $148.3MM under its credit facility. After Q3, DRI increased the total credit available under its credit facility from $338.8MM to $500.0MM. The company intends to use the net proceeds of the two follow-on offerings and increased available credit from its debt facility to fund its near-term pipeline of royalty transactions. Management noted more than $300MM of available liquidity to deploy in near-term transactions. DRI announced the renewal of its NCIB of 10% of outstanding units (~3.28MM units) beginning 20-Nov-2023 and ending 19-Nov-2024. The company declared a cash dividend of $0.075/unit for Q4/23.
Revising estimates, maintaining C$18 price target. We have updated our estimated NAV for DRI’s royalty portfolio as of Q3/23A and have increased our Orserdu outlook given the strong ramp-up of Orserdu reflected in better than expected Orserdu royalties. Orserdu represents ~34% of our gross NAV. Our C$18 PT is based on a 1.25x operating NAV at 9%, reflecting the optionality inherent in DRI’s business model and our expectation that cash flow will be redeployed into accretive acquisitions. Our target remains unchanged given the recent equity financing dilution, however it may look conservative should new accretive deals are completed.