-- CIBC Capital Markets retained its outperformer rating on the shares of Alaris Equity Partners Income Trust (AD-UN.TO) while raising its price target to C$28.00 from C$25.00, the bank said in a note dated May 7, after the company reported its first-quarter results.
CIBC continues to "like" Alaris for its "stable base" of preferred distributions and upside potential from its common equity portfolio, it said.
CIBC retained its Outperformer rating and increased its price target from $25 to $28 as it increased its target price to book multiple from 1.0x to 1.1x. With a higher likelihood of asset sales in H2, CIBC said its expects Alaris will realize "meaningful" fair value gains in 2026, supporting ROE expansion and justifying a higher P/B multiple.
AI-related disruption has increased demand for the service-based mid-market businesses that Alaris specializes in, noted CIBC, saying this demand will impact Alaris from both sides, improving exit opportunities for its partners that are looking to sell while making it more challenging to deploy capital at favourable multiples.
Despite funding being more competitive, CIBC believes Alaris can still win deals on the strength of its differentiated funding model, providing partners with the opportunity to raise capital while still retaining control. Management suggested the potential for multiple exits in H2, and CIBC views that as a reasonable base case assumption, added CIBC.
"Partner-specific commentary was limited, but looking at some of Alaris' longer-tenured common equity partners we think Edgewater, Fleet, and Carey Electric are potential sale candidates," said CIBC. "Asset sales are an important catalyst for Alaris, and the resulting fair value increases should help support our target valuation of 1.1x P/B."
On Liquidity & Deployment Opportunities, Alaris noted it had US$115MM of capacity on its credit facility that could be deployed into new partner investments. While the credit facility does have US$115MM of capacity, CIBC calculates that Alaris "can only draw near C$85MM before hitting its 3.0x "Net Debt-to-Contracted EBITDA" covenant." "Even then, we don't see management taking leverage close to the 3.0x covenant and believe it is more likely that Alaris waits until certain partner monetization events are complete, or nearly complete, before making additional investments," added CIBC.
Price: $22.93, Change: $+0.33, Percent Change: +1.46%