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

RBC Report

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Their upside scenario target is $31.00. GLTA

Alaris Equity Partners Income Trust

Solid Q4/21 results with portfolio performance remaining very strong

Our view: Alaris reported another solid quarter with Q4/21 normalized EBITDA slightly ahead of forecast, 2022 preferred distribution resets coming in ahead of our forecast and overall portfolio performance remaining at historical highs. We maintain our Outperform rating and see the stock as appealing for investors looking for a small-cap stock offering an attractive distribution yield with exposure to the private equity industry.

Key points:

Q4/21 normalized EBITDA of $30.7MM was slightly ahead of our forecast of $30.3MM, but in line with consensus of $30.6MM (range of $30.0MM to $31.5MM). We note that we backed out $1.7MM of FX gains, $25.6MM from of investment fair value gains, and $1.4MM of transaction costs from Alaris’ reported EBITDA of $56.6MM. The positive variance from our forecast was driven by higher-than-forecast revenues.

Quality of Alaris’ investment portfolio continues to trend better and are at historical highs, with a weighted average earnings coverage ratio (ECR) of ~2.1x and with ~75% of its portfolio having an ECR >1.5x (see page 3 for more analysis on Alaris’ reported ECRs this quarter).

Other takeaways: (1) Alaris estimates the 2022 overall preferred distribution reset is about +2.4%, which was ahead of our forecast. It would have been +4% excluding LMS, which had a significant negative reset of -18%; (2) Alaris has $135MM of available debt capacity; (3) current run-rate revenue is $150.7MM and run-rate cash flow is $32.5MM, or $0.72/unit; and (4) Kimco continues to contemplate a potential full redemption of its units and repayment of the promissory notes. Using a revised redemption formula, Alaris estimates potential proceeds could be between US$65- $75MM.

Maintaining $25/share 12-month target and Outperform rating. Conference call today at 11am EST; dial-in: 1-866-475-5449