CRH Medical’s Austin Gastroenterology acquisition gets thumbs up at PI

PI Financial analyst Sheila Broughton likes CRH Medical’s (CRH Medical Stock Quote, Chart, News: TSX:CRH) latest acquisition.

This morning, CRH announced it had acquired 51 per cent of Austin Gastroenterology Anesthesia Associates LLC (AGAA), a company that is expected to generate about (U.S.) $11.0-million in revenue this year.

“The physicians of AGAA have been CRH O’Regan system customers for several years, underlining the importance of the relationships we’ve established through the product side of our business,” said CEO Edward Wright. “We continue to be very encouraged by our strategy of leveraging our existing relationships to create growth opportunities for our anesthesia services business. This acquisition in Texas continues to demonstrate our ability to expand our anesthesia services business, while still maintaining the ability to create seamless integrations onto our platform. We have existing CRH O’Regan system customers across the entire country, and we look forward to increasing the reach of our anesthesia business in a meaningful way.”

Broughton says this acquisition is an example of CRH management doing what they said they would.

“This acquisition is clearly in line with management’s comments of completing further anesthesia JVs / acquisitions in 2016 to continue to expand its service offering,” says the analyst. “Prior to this acquisition we estimate CRH had ~$17M of available credit on its $33M credit facility, ~$7M of cash on hand and was generating ~$5M of cash per quarter. Management noted that this acquisition was accretive to both EBITDA and cash flow.”

In a research update to clients today, Broughton maintained her “Buy” rating and one-year price target of (U.S.) $5.00 on CRH Medical.