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Alaris Royalty: Take The Money And Run

Jun. 09, 2020 1:22 AM ETAlaris Royalty Corp. (ALARF)16 Comments


  • We were bullish on the stock when we last wrote about it.
  • Since then, it has announced its Q1 results and had a dividend cut.
  • We analyse the numbers and present our current outlook on the company.
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The dividend cut was priced in! That may come as a shock to those who ascribe to the school of thought that a dividend cut can never be priced in, but in this case it was. We are talking about Alaris Royalty Corp. (OTC:ALARF). When we last touched on this company, we suggested that investors look past the likely dividend cut and still hold their nose and buy.

Alaris is a good buy (not good bye) at the current price, and the yield and tangible book give investors good reason to get involved. We are expecting 50% upside along with a big dividend yield. This yield can be cut down the line, so we would not get too attached to it. Regardless of what happens here, Alaris Royalty is mispriced as a commoner and should provide good returns in all but the worst-case scenarios.

Source: "Alaris Royalty: Currently Priced As A Commoner," Seeking Alpha, March 26, 2020

Alaris went a bit lower as investors started pricing not one, but two, asteroid strikes on planet Earth. However, it soon bottomed and rocketed higher.

With Q1-2020 results and a dividend cut coming into play since we wrote that article, we decided to do an update and let you know why we are ready to stick a fork in this.


Alaris determined that its revenue streams were definitely going to be hit down the line, even if they were not in Q1-2020.

Based on the Corporation's assessment of COVID-19 and its current and possible future impact on Partner businesses, fair values of certain investments were reduced (recorded as an unrealized loss of investments at fair value) by a total of $84.9 million in the period ($2.33 per share). This reduction results in a fair value of investments of $739.7 million at March 31, 2020.

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This article was written by

Trapping Value profile picture

Trapping Value is a team of analysts with over 40 years of combined experience generating options income while also focusing on capital preservation. They run the investing group Conservative Income Portfolio in partnership with Preferred Stock Trader. The investing group features two income-generating portfolios and a bond ladder.

Trapping Value provides Covered Calls, and Preferred Stock Trader covers Fixed Income. The Covered Calls Portfolio is designed to provide lower volatility income investing with a focus on capital preservation. The fixed income portfolio focuses on buying securities with high income potential and heavy undervaluation relative to comparatives. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (16)

Marty Popoff profile picture
I’m very curious how you calculate tangible book value.

- There is no traded market for their assets - do you treat it like a bond? I.e.Alaris gave company XYZ $10 million, so TBV is $10 million forever and ever. Prices of bonds fluctuate with interest rates / credit spreads.
- or, do you have some formula, I.e. a DCF model?
Trapping Value profile picture
They calculate it every quarter based on discounted cash flows and risk attached to those cash flows. Read their MD&A.
Marty Popoff profile picture
Okay thanks - comes from management, management makes its own assumptions..will look into MDA
Ventureshadow profile picture
Thanks much, Trapping ! I'm looking forward to taking a profit on Alaris.
eccodog profile picture
Thanks for the informative article, I’ve held the stock for the dividend but sold just before the crash, luck more than skill, the dividend didn’t look sustainable. I’d like to see a write up on Diverisfied Royalty, DIV on the TSX.
trailerparkliving profile picture
how do you feel about the debentures?
Trapping Value profile picture
They should be extremely safe considering overall leverage.
Nah. Not a gambler on this one, rida. Looks like a great possibility for the real gamblers out there, though.......................great article and explanations, as usual.......................Thanks..............Jim
Trapping Value profile picture
We have a hold rating on it today.
Found the guy that read the headline, and went straight to the comments to pass judgement on something they have obviously not read.........
Sounds like a strong BUY recommendation to me!
Trapping Value profile picture
Sounds like Bubba needs to make it to the end of the article.
Spockster profile picture
Lol :-)
jamiemacph profile picture
Might help if he made it through the first few paragraphs even! Either way thanks for the follow up. No skin the game with Alaris myself but I have a lot of respect for authors that revisit their thesis and give level headed updates.
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