Dri Healthcare Trust T.DHT.UN

RE:RBC 2

[newcoin]

Amazing price targets. Very exciting to see what they can do. Good Pedegree on this company. They could go all the way.

retiredcf wrote:

DRI Healthcare Trust

Q4/21: Cash royalties and EBITDA ahead of estimates while revenues missed; strong deal pipeline

Our view: While Q4/21 royalty income was below RBC and consensus estimates, adj. EBITDA and cash royalty receipts were ahead of forecasts. Management noted that the deal pipeline has grown close to US$1.6B with two deals under exclusivity (~$70MM) and another four deals in very late stages (~$500MM). Following completed deals of up to $186MM in 2021 (ahead of the $140MM target), management expects to beat the $140MM target in 2022 as well .DRI declared a cash dividend of $0.075/unit for Q1/22.

Key points:

Cash receipts and adj. EBITDA above estimates; revenue below estimates.

DRI reported cash royalty receipts of $34.5MM for Q4/21, above RBCe ($32.6MM). Adj. EBITDA for Q4/21 was $32.0MM, higher than RBCe ($29.3MM) and consensus ex-RBC ($26.2MM). Adj. EBITDA margin at 88% improved q/q (85% in Q3/21). However, total revenue including interest income ($1.3MM) of $22.2MM was below RBCe ($24.6MM) and consensus ex-RBC ($27.2MM). We consider cash royalties to be a more meaningful measure, as they represent the actual cash generated, and as such, we view the strength in cash royalties favourably.

Updates on the deal pipeline. DRI management noted that its deal pipeline has grown to close to US$1.6B with two deals under exclusivity (~$70MM), another four deals in late stage (~$500MM), an additional four deals in the middle stage (~$300MM), and the remaining deals in early stage (~ $700MM). The late-stage deals are for approved and marketed products. Following $186MM in completed deals in 2021, ahead of the $140MM target, DRI expects to beat the $140MM target of deal executions in 2022 as well. Recall that DRI had guided for $650–750MM of royalty acquisitions in the first five years post IPO. Management noted that the distress in the broader equity markets and specifically for biotech companies is benefiting DRI with an improved ability to negotiate prices and create royalty structures which are more favorable to the company.

Dividend and NCIB update. Since the launch of the NCIB in Q4/21, DRI has acquired 1.44MM units for ~$7.6MM. DRI is further extending its NCIB to buy back 2.5MM units, up from 1.5MM units previously. DRI paid its previously declared dividend of $0.075/unit and the 2021 special dividend of $0.22/unit on 20-Jan. The company declared a cash dividend of $0.075/ unit for Q1/22 payable on 20-Apr to unit holders of record on 31-Mar. Revising estimates, maintaining C$14 price target. We update our estimated NAV for the Seed Asset portfolio as of Q4/21A. We use an 8% discount rate, which we increased from 7% last week as we incorporated the higher yield environment and the beginning of the rate-hiking cycle with the first rate hike of 25bps by BoC earlier this month. Our C$14 price target is based on a 1.25x operating NAV at 8%, reflecting the optionality inherent in DRI’s business model and our expectation that cash flow will be redeployed into accretive acquisitions