AF
ALARMFORCE INDS INC
stock TSE

DHT.UN on TSX.
TL;DR. They make lots of low-risk cash with upside optionality. They will make even more cash through existing investments that have years and years to run. They will recycle that cash to make more cash. Mr Market is discounting the compounding cash machine hard vs the only other (much) bigger public company in their business.
DHT buys pharma royalties with average payback in the 3-6 year range. Underwrites to 10-15% unlevered IRRs. Decades of high teens ROE. Hard-won expertise, relationships, investments, track record and capital sources give them a wide moat in this niche business.
IPO USD10 2021. USD3 of normal and special distributions since. Trading USD13, CAD18.50.
20% FCF. 3.6% yield before specials. 1.4x book, under 1x if b/s fair valued. 5x EV/EBITDA next Q. Active buyback. Very smart management.
Pumps USD50mm cash revenues every Q. 90% margin.
Distributes $6mm. Net $30-40mm pays down bank loan. Zero bank loan balance Q3, $100mm cash. Fixed term debt at cheap rates. Net debt to (understated) book equity 50% Q3 before deal just announced.
Very selective on investments — one or two a year on average. Q3 will record $180mm deal bought back by a seller for $60mm gain (USD1.10/unit) and 28% IRR. Just announced $320mm deal this week and said that deal alone takes them to their 2030 EBITDA target.
45% discount to analyst price targets after increases on deal news. Probably same discount to intrinsic value. Scotia PT USD30.
One other public company is the space. RPRX. $34billion market cap. 7% FCF, 4x book, 14x EV/EBITDA, 1.6% dist yield.
Why so so cheap vs comp?
Illiquid AF. Market cap only CAD900mm, trades 35k a day. 65%++ held by institutions. Top 3 CIBC Mackenzie and Dixon hold 45%, never selling. Not in any major indexes.
Few catalysts. 4 earnings, a deal or two per year. Price always pops after news and resulting PT increases but momentum fades as liquidity seekers get selling.
USD revs and US exposure. Maybe no US investors because TSX, small cap and tax issues. Canadian investors opting to reduce US exposure.
What could change?
Q3 book earnings USD1.30/unit and TTM P/E 8.5x will hit a lot of screens. Some screeners will dig in and uncover the outstanding fundamentals and outlook.
Chart was busted by aggressive short selling over the summer after CAD19.75 all time high was not confirmed with volume. Lots of units transferred from weak hands to strong in the drawdown to $16.50. Pop back to $18.50 on deal news this week looks durable ahead of Tuesday ex-dist date and Nov Q3 reporting on the horizon.
True float may be 10 to 15 million vs. 55 million outstanding. Short balance of 450k has a big problem against 35k trades a day. New deal was contingent on FDA approval, which happened after hours Friday. Monday I expect a test of $19.75 ATH.
DHT is actively pursuing new institutional investors. Q3 numbers and the new deal make those pitches a lot more compelling. Just a few bites might move unit price well into the $20s and shake out remaining weak hands.
Canadian investors may get less wary of US exposure if the dems take the house (very likely) and senate (60/40 odds on polls and betting markets) November.
Possible that DHT is taken private or catches a takeover bid from RPRX or a pension fund if the market doesn’t narrow the massive valuation gap vs RPRX.

DHT.UN on TSX.
TL;DR. They make lots of low-risk cash with upside optionality. They will make even more cash through existing investments that have years and years to run. They will recycle that cash to make more cash. Mr Market is discounting the compounding cash machine hard vs the only other (much) bigger public company in their business.
DHT buys pharma royalties with average payback in the 3-6 year range. Underwrites to 10-15% unlevered IRRs. Decades of high teens ROE. Hard-won expertise, relationships, investments, track record and capital sources give them a wide moat in this niche business.
IPO USD10 2021. USD3 of normal and special distributions since. Trading USD13, CAD18.50.
20% FCF. 3.6% yield before specials. 1.4x book, under 1x if b/s fair valued. 5x EV/EBITDA next Q. Active buyback. Very smart management.
Pumps USD50mm cash revenues every Q. 90% margin.
Distributes $6mm. Net $30-40mm pays down bank loan. Zero bank loan balance Q3, $100mm cash. Fixed term debt at cheap rates. Net debt to (understated) book equity 50% Q3 before deal just announced.
Very selective on investments — one or two a year on average. Q3 will record $180mm deal bought back by a seller for $60mm gain (USD1.10/unit) and 28% IRR. Just announced $320mm deal this week and said that deal alone takes them to their 2030 EBITDA target.
45% discount to analyst price targets after increases on deal news. Probably same discount to intrinsic value. Scotia PT USD30.
One other public company is the space. RPRX. $34billion market cap. 7% FCF, 4x book, 14x EV/EBITDA, 1.6% dist yield.
Why so so cheap vs comp?
Illiquid AF. Market cap only CAD900mm, trades 35k a day. 65%++ held by institutions. Top 3 CIBC Mackenzie and Dixon hold 45%, never selling. Not in any major indexes.
Few catalysts. 4 earnings, a deal or two per year. Price always pops after news and resulting PT increases but momentum fades as liquidity seekers get selling.
USD revs and US exposure. Maybe no US investors because TSX, small cap and tax issues. Canadian investors opting to reduce US exposure.
What could change?
Q3 book earnings USD1.30/unit and TTM P/E 8.5x will hit a lot of screens. Some screeners will dig in and uncover the outstanding fundamentals and outlook.
Chart was busted by aggressive short selling over the summer after CAD19.75 all time high was not confirmed with volume. Lots of units transferred from weak hands to strong in the drawdown to $16.50. Pop back to $18.50 on deal news this week looks durable ahead of Tuesday ex-dist date and Nov Q3 reporting on the horizon.
True float may be 10 to 15 million vs. 55 million outstanding. Short balance of 450k has a big problem against 35k trades a day. New deal was contingent on FDA approval, which happened after hours Friday. Monday I expect a test of $19.75 ATH.
DHT is actively pursuing new institutional investors. Q3 numbers and the new deal make those pitches a lot more compelling. Just a few bites might move unit price well into the $20s and shake out remaining weak hands.
Canadian investors may get less wary of US exposure if the dems take the house (very likely) and senate (60/40 odds on polls and betting markets) November.
Possible that DHT is taken private or catches a takeover bid from RPRX or a pension fund if the market doesn’t narrow the massive valuation gap vs RPRX.