An inflammatory blog post designed to raise fears about Nobilis Health (TSX:NHC) doesn’t detract from the company’s strong fundamentals, says PI analyst Sheila Broughton.
On Friday, an anonymous post to the website Seeking Alpha from an author by the name of “The Emporer Has No Clothes” caused a sharp selloff in shares of Nobilis that caused the stock to be halted.
The post called the company “significantly overvalued” and said insiders have cashed out more than $70-million through a combination of share sales and compensation. The post also said turnover at the CFO level was a “red flag”.
Nobilis owns and operates ambulatory surgical centers and surgical hospitals in parts of the United States.
Broughton says the opinions of the anonymous shorter were out of context, noting that the company’s revenue is up 216% year to date and EBITDA (excluding NCI) is up over 1,000% to $10.6-million from $0.8-million in 2014. The analyst tackled the insider selling accusations head on.
“Nobilis’ insiders and management own ~25M shares or share units representing approximately ~30% of shares on a fully diluted basis,” said Broughton. “CEO, Chris Lloyd has not sold any shares and continues to hold ~3.1M shares and ~1.1M share units. Nobilis raised ~$25M of debt with well known healthcare lender GE Capital in advance of its spring equity raise. The participation of both Don Kramer and Harry Fleming as secondary selling shareholders was clearly disclosed at the time of the transaction.”
In a research update to clients today, Broughton maintained her “Buy” rating and one year target price of (U.S.) $9.50 on Nobilis Health.