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

As Promised -Scotia Report-Likely updated tomorrow

[SunsetGrill]

Q4/21 Initial Take - Results A Touch Ahead Of The Street But In Line With Our Expectations

OUR TAKE: Positive. Alaris closed out a strong 2021 with a solid fourth quarter that saw estimated normalized EBITDA come in a bit ahead of Street expectations but right in line with our forecast.

The health of AD's portfolio continues to improve. The company's weighted average Earnings Coverage Ratio (ECR) is now in excess of 1.8x (up from 1.7x in the previous quarter). Of the 19 partners, two have an ECR in the 1.0x to 1.2x range, two are in the 1.2x to 1.5x range, three are in the 1.5x to 2.0x range, and twelve have an ECR greater than 2.0x.

Alaris deployed ~$358M of capital during 2021, a record year for the company, that included $51M of investments in common equity positions in certain partners.

We will provide a full update following the March 10 conference call at 11:00 a.m. ET (dial-in: 1-888-475-5449).

KEY POINTS

Estimated Normalized EBITDA/sh of $0.71 came in slightly ahead of the Street at $0.68 but in line with our expectations. This was down 4% sequentially and year-over-year. Net Cash from Operating Activities per share of $0.61 came in ahead of our expectations and was up just under 3% over last year but down 7% sequentially.

Alaris expects a net positive reset of roughly 2.4% for preferred distributions that are scheduled to reset in 2022. Management anticipates the Trust’s payout ratio to be within a range of 60% and 65% based on its current run-rate revenue and expense outlook.

This quarter, 15 investments had no change in their ECR, three (3E, Accscient, and D&M) experienced an increase in their ECR, while SCR was the only investment to experience deterioration.

• Quarterly Financials
• Yearly Financials

Historical price multiple calculations use FYE prices. All values in C$ unless otherwise indicated.
Source: FactSet; company reports; Scotiabank GBM estimates.

Qtly CFPS from Ops  (FD)	Q1	Q2	Q3	Q4	Year	Price/Cash Flow Ops
2020A	$0.72	$0.38	$0.28	$0.59	$1.98	7.6x
2021E	$0.66A	$0.45A	$0.66	$0.49	$2.25	8.3x
2022E	$0.56	$0.56	$0.57	$0.58	$2.27	8.0x
2023E	$0.58	$0.61	$0.60	$0.61	$2.41	7.5x

Exhibit 1 - Alaris Royalty Corp. Quarterly Summary

Source: Company reports; Scotiabank GBM estimates.

Company Overview

Company Description

Alaris Equity Partners Income Trust is a Calgary-based investment management company that uses innovative financing structures to invest primarily in the preferred equity of well-managed private companies. Alaris looks for companies that have a history of growth, low cyclicality, sustainable free cash flow, and future growth opportunities. As at December 31, 2021, Alaris had investments in 19 companies with a cumulative fair value of almost $1.2 billion.

 

Key Risks

Financial and operational health of existing partners, risks associated with investing in new partners, dependence on stock price to make attractive acquisition, FX, competition with other investment entities, key personnel, private company-specific risk.