Section1: Company Overview and Fundamental Insights

1.1 Company Overview:

Diversified Royalty Corp (TSX: DIV) is a multi-royalty company. It is engaged in the business of acquiring royalties from multi-location businesses and franchisors in North America. As a part of the investment strategy, the firm always purchases trademarks of the companies it is going to acquire.

1.2 The Key Positives, Negatives, Investment Highlights and Risks

1.3 Top 5 Shareholders:

The top 5 shareholders together form ~14.00% of the total shareholding. Polar Asset Management Partners Inc. and Fidelity Management & Research Company LLC holds a maximum stake in the company at ~­­­8.03% and ~1.70%, respectively.

1.4 Key Metrics:

The company is reported higher sales and net income in Q2 2022, which is a key positive. Furthermore, it witnessed improved EBITDA and distributable cash along elevated royalty pools, which lead to growth in cash from operations, demonstrating its strength and adaptability.

Section 2: Business Updates and Financial Highlights

2.1 Recent Updates: The below picture gives an overview of its recent activities, such as announcement regarding dividend distribution:

2.2 Insights of Q2 2022 Financial Performance:

Section 3: Key Risks, Company Outlook:

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

4.2 Fundamental Valuation

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is August 22, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

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