Dri Healthcare Trust T.DHT.UN

Stifel Raises Target

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Stifel’s Justin Keywood bumped his DRI Healthcare Trust  target to $17 from $16 with a “buy” rating. The average is $19.27.

“DRI is a portfolio of 25 royalty assets tied to the global pharmaceutical industry,” he said. “After a period of substantial capital deployment and solid growth quarters recently, a surprise development related to the prior CEO and alleged expense irregularities led to a sharp correction in share price on July 8. We also downgraded the stock at the time with uncertainty of the eventual fall-out of an ongoing investigation. However, our discussions with several members of DRI’s executive team and chairman have provided us confidence that the identified US$6.51-million in irregular expenses is accurate and several initiatives to improve governance and controls are underway.

“We also see limited impact on DRI’s revenue and cash flow receipts for 2024 but expect onetime expenses related to the investigation. DRI has conveyed a still active M&A pipeline as an inflection in the industry is underway in capital-constrained markets and is on pace to more than double in 2024. We see additional transactions for DRI as positive catalysts for the stock, reinforcing a high-margin growth outlook, additional scale and the potential to narrow valuation vs larger royalty peer RPRX at 40-per-cent greater valuation.”