On Friday, Scotiabank adjusted its outlook on shares of Dye & Durham Ltd (DND:CN) (OTC: DYNDF), reducing the price target to C$20.00 from the previous C$23.00. Despite the decrease, the firm maintained its Sector Outperform rating on the company's shares. This decision reflects a mix of cautiousness and optimism as the analyst noted both challenges and growth opportunities for Dye & Durham.
The analyst pointed out that while the real estate market is currently weak, Dye & Durham is experiencing growth in other areas of its business. The company's corporate due diligence and payments segments are particularly strong, contributing to an acceleration in organic growth to 8% compared to 4% in the previous quarter. This performance suggests resilience in the company's diverse operations.
Looking ahead, Scotiabank anticipates an uptick in real estate activity in the fiscal year 2025 (FY25), aligning with management's expectations for a market rebound. In the meantime, Dye & Durham is concentrating on factors within its control, such as cost optimization strategies.
The company is also working towards reducing its leverage ratio, aiming to reach 4.0x. Scotiabank's projections show leverage potentially hitting 3.9x by the first quarter of fiscal year 2026, slightly later than their earlier estimate of the fourth quarter of 2025.
The revised financial model for Dye & Durham incorporates the acquisition of NexisLexis Affinity in the Asia-Pacific region, which was completed in the first quarter of FY25. The model also takes into account increased restructuring costs and a smaller benefit from working capital adjustments in FY25 than previously anticipated.
Finally, the analyst forecasts a significant rise in free cash flow (FCF) for Dye & Durham in FY25. The projection is approximately $97.5 million, a substantial increase from the estimated $26.5 million in FY24. This expected jump is largely attributed to the company's initiatives to stimulate organic growth.
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