(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.

Deutsche is of the opinion that an outright sale of the entire company is a long shot: "We put low odds on MDTH's strategic review process leading to an outright sale of the company to a single strategic buyer because the most viable synergies of the assets reside with individual local hospital/health system buyers."

As a result, Deutsche is forecasting the sales process to be completed before year-end 2010, and 80% upside in MedCath shares within the next 12 months.

Raymond James wrote that a conservative estimate of an asset-by-asset sale of MedCath would result in a share price in the range of $12 to $15. On Thursday morning, MedCath shares were trading at $10.76 after the Deutsche-triggered rally. On March 1, MedCath shares were at $6.87 and have been climbing steadily since the news broke.

Raymond James wrote in its research note on March 4 that "MedCath could ultimately reap ~$300 million by selling each of the company's hospitals in market-by-market transactions, which after factoring in ~$40 million in pro forma net parent company level debt...should return ~$250 million to shareholders, or $12 to $15 per share."

-- Reported by Eric Rosenbaum in New York.

RELATED STORIES:


Follow TheStreet.com on Twitter and become a fan on Facebook.

Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

More from Stocks

OPEC, Bank Stress Tests, Disney and Tesla - 5 Things You Must Know

OPEC, Bank Stress Tests, Disney and Tesla - 5 Things You Must Know

Dow Logs Eighth Straight Drop as Stocks Slump

Dow Logs Eighth Straight Drop as Stocks Slump

Novo Nordisk Stock Rises 4% Over 2 Sessions

Novo Nordisk Stock Rises 4% Over 2 Sessions

Stock Market Just Took Another Beating -- Here's What You Need to Know

Stock Market Just Took Another Beating -- Here's What You Need to Know

This Is What's Hot Thursday - Stocks Slide, Intel's CEO Woes & Major Movers

This Is What's Hot Thursday - Stocks Slide, Intel's CEO Woes & Major Movers