Cantor Fitzgerald raises target on QHR Technologies to $1.70

Yesterday, QHR announced it had executed a definitive and binding agreement for the sale of its enterprise management solutions division to Logibec Groupe for approximately $20-million.

CEO Al Hildebrandt said the deal made sense on several fronts.

“We have made a strategic decision to continue our aggressive focus and growth plans in the electronic medical records (EMR) and revenue cycle management (RCM) markets,” he said in a note accompanying the announcement. “In addition, QHR will realize a solid return for the investment we made in the EMS business. This transaction will provide significant financial resources and capacity to accelerate our market growth in the Canadian and U.S. health care markets with our EMR and RCM solutions where we believe SaaS model market opportunities can be expanded.”

Kew agrees that the divestiture is positive for all the reasons Hildebrandt suggests. First, he says QHR got a solid valuation on its EMS business, and this cash injection will help fuel the company’s growth in becoming an EMR pure-play. He says this focuses all the company’s efforts on its most profitable segment, noting that the division has a compound annual growth rate of 69% over the past three years.

In a research update to clients this morning, Kew maintained his BUY rating, but raised his one-year target on QHR Technologies to $1.70, up from his previous target of $1.30. This target, he says, is based on 12× his estimate of the company’s fiscal F2014 EV/EBITDA.

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