RBC Capital Markets downgraded CML Healthcare to Sector Perform (Hold) based on recent price appreciation and slightly lower return expectations. RBC's new price target for CML is $15.
CML Should Remain A Core Long-Term Holding. At the same time, investors should note that RBC views CML as a core long-term holding.
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RBC also highlighted the two issues:
While not impacting our forecast or valuation, we also flag two further items: uncertainty regarding a new Ministry of Health (MOH) community lab agreement in 2011 (given the government's fiscal situation) and the implications of the pending distribution cut in 2011 that could be higher than we estimate if CML chooses to invest its cash flow in growing the business through acquisitions. As a result, we believe that at current levels, it is prudent to adopt a slightly more cautious outlook until we have greater visibility on certain issues.
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For the year ended December 31, 2009, the Fund generated distributable cash of $106.4 million and declared distributions totaling $96.0 million, representing a payout ratio of 90.2%.
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