MedCath Rises on Deutsche Upgrade

(Medcath story updated with details from Deutsche Bank upgrade)

CHARLOTTE, N.C. (TheStreet) -- MedCath(MDTH) is receiving a big boost on Thursday morning from a Deutsche Bank upgrade.

Shares of MedCath were up more than 14% on Thursday and had far surpassed its average daily volume of 213,000 shares traded before the midday mark.

Deutsche upped shares of the cardiovascular disease services provider and hospital operator to a buy on the thesis that its current plans to sell itself or individual hospital assets has a higher value than it is currently being assigned. The board of directors of MedCath announced a few weeks ago that it had formed a strategic options committee and had hired a financial advisor to pursue its sale options.

The Street thesis that the breakup value of MedCath is worth more than current estimates was also behind an upgrade to buy on the stock from Raymond James right after the news about a potential sale first broke.

Deutsche raised MedCath from hold to buy and raised its price target to $17 from $9.

"Put simply, we believe MDTH's decision to pursue strategic alternatives opens up the door for the company to be sold off in pieces, and we believe MDTH's assets should be more valuable to local strategic buyers than the current publicly-traded enterprise value. Based on MDTH's history of selling individual assets over the years, we conclude that the parts are worth more than the whole," Deutsche analyst Darren Lehrich wrote.

Deutsche places a valuation for the enterprise in a sum-of-the-parts break-up sale of approximately $750M and a net value per share of $16.72. Its analysis points to a worst case valuation of $12 per share and best case valuation of $23 per share.