iA Capital Equity analysts at iA Capital Markets upgraded their “2022 Top Picks” list for the fourth quarter in a research report released Monday before the bell.
“While the performance of our 2022 Top Picks fell into negative territory in the latter half of Q3, I am somewhat happy that we still outperformed the TSX Composite Index by 412 bps since we started tracking in January,” said Neil Linsdell, the firm’s Head of Research. “Recall that in 2021, our Top Picks delivered a return of over 34 per cent, beating the TSX Composite Index at just under 22.”
Healthcare and Biotechnology
Chelsea Stellick named DRI Healthcare Trust and Quipt Home Medical Corp. (QIPT-X) as her top picks for the quarter.
For DRI, she has a “buy” rating and $13 target for DRI. The average on the Street is $14.53.
“DRI has multiple advantages in this continued difficult macro-environment,” the analyst said. “First, the Trust has capital to deploy at a time when cash is in short supply in the biotech/pharma space, which will facilitate the execution of favourable deals in the pipeline. Second, DRI has no exposure to inflationary cost pressures given its flow-through royalty business model. Third, DRI’s portfolio consists of medically necessary pharmaceutical products that render sales and royalty receipts recession-resistant. Finally, the Trust pays a quarterly dividend well-covered by cash flow from existing assets, and remaining cash flow is reinvested.”
Ms. Stellick kept a “buy” rating and $14 target for Quipt, exceeding the $12.66 average.
“The worst of the ventilator supply chain issue (due to a supplier recall) is now in the rear-view mirror, and catching up on the ventilator waitlist in F2023 will provide a small boost to organic growth alongside the layering in of integration synergies from recent and upcoming acquisitions. QIPT trades at a significant discount to its peers (5 times vs. 10 times F2022E EV/Adj. EBITDA), which we believe is unwarranted given management’s strong track record of successfully improving profitability over time and the superb demographic and regulatory tailwinds of the business,” said Ms. Stellick.