Medical Facilities Corp. gets price target raise at Canaccord Genuity

The announcement of a new facility has Canaccord Genuity analyst Neil Maruoka feeling bullish about Medical Facilities Corp. (Medical Facilities Corp. Stock Quote, Chart, News: TSX:DR).

This morning, Arkansas Surgical Hospital, a subsidiary of Medical Facilities Corp. announced it had entered into a joint venture with Ambulatory Innovation Associates to establish an urgent care centre in Little Rock, Arkansas.

“Providing the residents of Little Rock and the surrounding area with a broad range of urgent ambulatory care procedures through this new centre reflects our continuing commitment to the highest levels of patient care,” said Arkansas Surgical Hospital CEO Carrie Helm. “Patients at this new facility will receive the same quality of care and attention to detail as the five-star service they receive at ASH.”

Maruoka says that though he expects this development won’t immediately make a big difference to the company’s balance sheet, it is a positive sign.

“The new facility will provide laboratory, imaging, and diagnostic services to patients at MFC’s Arkansas Surgical Hospital (ASH); further, we expect this urgent care will have similar brand recognition to the high-quality image of ASH,” the analyst says. “While the new urgent care centre is likely to have a modest incremental financial impact in the near term, more importantly we believe this initiative is a strong indication that MFC continues to advance its strategy despite the recent and abrupt departure of CEO Britt Reynolds.”

In a research update to clients today, Maruoka maintained his “Buy” rating, but raised his one-year price target on Medical Facilities Corp. from $14.50 to $16.00, implying a return of 16.2 per cent at the time of publication.

Maruoka believes Medical Facilities Corp will generate EBITDA of $105.0-million on sales of $383.5-million in fiscal 2017. He expects those numbers will improve to EBITDA of $111.1-million on a topline of $377.6-million the following year.