Post by
SuperM on Feb 29, 2024 9:35am
RBC Quick Take before conference call
Seems very posotive. Should see many upgrades in the next couple of days.
GLTA
SM
DRI Healthcare Trust Q4/23 Results - Strong quarter aided by milestones; Increases quarterly cash dividend by 13% TSX: DHT-U | CAD 14.31 | Outperform | Price Target CAD 19.00 Sentiment: Positive Our view: Overall, we view DRI's Q4/23 results as positive for the shares. Q4/23 total income, cash receipts and adj. EBITDA were ahead of estimates aided by milestone payments.
Total income of $75.8MM was significantly above RBCe ($29.7MM) and consensus ($32.2MM) aided by $38.7MM of milestone royalty income. Excluding the milestone income, total income of $37.2MM was still ~25% ahead of RBCe ($29.7MM) and ~15% ahead of consensus ($32.2MM). Cash royalty receipts of $52.3MM were stronger than our estimate ($40.0MM) and benefited from Orserdu related milestone payments of $15.4MM (vs. RBCe: $2.8MM).
Adj. EBITDA of $46.5MM was ahead of RBCe ($34.9MM) and consensus ($31.1MM). DRI increased its quarterly cash dividend by ~13% to $0.0850/unit for Q1/24 (up from $0.0750/unit previously) to be paid on 19-Apr-2024.
DRI introduced 2024 royalty income guidance of $153-155MM (+30%-32% y/y), excluding milestone income and any new transactions. This compares to consensus total income of ~$158MM (which likely includes milestone income) and RBCe (~$164MM, excluding milestone income). On the earnings call, we would look for updates on the existing portfolio of royalties, the company's deal pipeline, management's return expectations for future royalty acquisitions and any change in the competitive landscape. We see the Q4 strength as positive for the shares as we believe the favourable cash flow contributes to the company's ability to reinvest at a faster pace, thereby ultimately increasing the compounding effect on returns.
Total income (revenues) well above RBC and consensus estimates; Cash royalties ahead of RBCe. DRI reported total income of $75.8MM meaningfully ahead of RBCe ($29.7MM) and consensus ($32.2MM) estimates. Total income included milestone royalty income of $38.7MM ($33.7MM Orserdu; $5.0MM Vonjo). Excluding the milestone royalty income, total income of $37.2MM ($36.8MM royalty income; $0.4MM interest income) was ~25% ahead of RBCe ($29.7MM) and ~15% ahead of consensus ($32.2MM). The strength in royalty income (ex-milestone) vs. RBCe was led by strong Orserdu royalties ($12.1MM vs. RBCe $6.4MM) partially offset by lower Xolair royalty income ($1.5MM vs. RBCe: $2.9MM). This royalty income should drive royalty receipts over the coming quarters once payment lags of one to three quarters under DRI’s royalty agreements are considered. DRI reported total cash royalty receipts of $52.3MM, ahead of RBCe ($40.0MM) aided by milestone royalty receipts of $15.4MM (vs. RBCe: $2.8MM). Excluding the milestone receipts, cash royalty receipts of $36.9MM were essentially in line with RBCe ($37.3MM, ex-milestone receipts) led by a miss in Zytiga and Oracea receipts partially offset by strength in Orserdu and Empaveli. Q4/23 adj. EBITDA of $46.5MM was stronger than RBCe ($34.9MM) and consensus ($31.1MM). The adj. EBITDA margin of 89% improved q/q (80% in Q3/23). DRI recorded performance fees of $5.9MM in Q4/23 ($24.5MM for full year 2023). In December 2023, DRI filed a complaint against Takeda in the State of New York alleging breach of contract and seeking damages. Consequently, DRI recognized an impairment loss of $9.2MM related to the Natpara royalty asset in the quarter. 2024 royalty income guidance of $153-155MM, excluding milestone income and any new transactions. DRI introduced royalty income guidance of $153-155MM (+30%-32% y/y), excluding milestone income and any new transactions. This compares to consensus total income of ~$158MM (which likely includes milestone income) and RBCe (~$164MM, excluding milestone income). We see the outlook as conservative. Balance sheet and dividend update. DRI ended Q4/23 with cash on hand of $62.8MM and had drawn $148.3MM under its credit facility. The company paid its previously announced regular dividend of $0.075/unit and special dividend of $0.2662/unit on 19- January to unitholders of record as of 31-December-2023. Today, it declared a cash dividend of $0.085/unit (~13% increase vs. the prior regular quarterly cash dividend of $0.075/unit) for Q1/24 payable on 19-April-2024 to unitholders of record on 31- All values in USD unless otherwise noted. Priced as of prior trading day's market close, EST (unless otherwise noted). Disseminated: Feb 28, 2024 19:41EST; Produced: Feb 28, 2024 19:41EST For Required Non-U.S. Analyst and Conflicts Disclosures, see page 3 DRI Healthcare Trust March-2024.
Tomorrow's conference call. We would look for updates on the existing portfolio of royalties. Additionally, we expect the focus to be on the company's $3B deal pipeline, management's return expectations for future royalty acquisitions and any change in the competitive landscape. We will look for additional colour on the recent royalty transactions whereby the Trust has increased its exposure to existing royalty assets in Orserdu, Omidria and Vonjo. Call details: Tomorrow (29-February) at 8:00AM ET. Dial-in: 1-888-664-6392 or 416-764-8659. Webcast link here