On June 29 you were asked for the best metrics to evaluate a royalty company like DHT.UN and your answer was:
We think the best metrics are distribution as a percentage of free cash flow (targeted between 30 and 35% as per management), new royalty transactions or pipeline, and EBITDA and FCF multiples.
Could you please supply the current numbers and information to fill in those metrics for DHT.UN, along with your commentary about what they lead you to conclude about the current health and future prospects of DHT.UN.
Thanks 5i,
Peter
Distribution/free cash flow (2022) 41%; the company has added $253M in royalty deals since Q1 2023 (towards its $900M target by 2025). EBITDA margin is 83%. With the company in high growth mode the EBITDA multiple is very high and not that meaningful yet. FCF mutliple is about 6X. The outlook looks fine. The portfolio duration is now 10 years, and management notes it has 16 near-term deals potentially and 10 more longer term possible deals. Its Orserdu drug (acquired in June) has good world-wide potential. The stock is tightly held (four entities own 40%) and thus can move nicely when buying comes in. It is having a very good year yet still has potential. We would not expect the same rate of return going forward, and EPS may did slightly next year. But the company is building a solid business, paying special dividends and doing many things right.