Medical Facilities Corp. gets price target raise at Industrial Alliance

A fourth quarter that was better than expected has Industrial Alliance Securities analyst Neil Linsdell raising his price target on Medical Facilities Corp. (Medical Facilities Corp. Stock Quote, Chart, News: TSX:DR).

On Thursday, DR reported its Q4 and fiscal 2017 results. The company earned (U.S.) $32.3-million on revenue of $111.3-million, a topline that was up three per cent over the same period last year.

“In 2017, our facilities continued to perform at a high standard, generating growth in surgery volume and achieving record levels of revenue and growth in adjusted EBITDA. As well, we continued to execute on our strategy to grow both organically and through acquisition, with progress on all fronts,”CEO Robert Horrar said. “In addition, we took some important measures to better position MFC for future growth. One was initiating our joint venture with NueHealth LLC, completed in February, 2018. Our combined skills of facility management, acquisition and valuation provide us with a strong platform for growth. Also, a goodwill impairment of $8.4-million was charged relating to Unity Hospital and our IMD hospital service business. This non-cash charge does not affect our cash balances, liquidity or operating cash flows. Notwithstanding this charge, management continues to believe that strategies are in place to deliver improved results.”

Linsdell says the company bested his expectations on both the top and bottom line. He thinks the good news will continue.

“Q4 results were better than we expected and its strong and growing portfolio of facilities provides a positive outlook for 2018 as MFC grows its presence with the acquisition of primarily specialty surgical hospitals and ASCs,” the analyst says. “By purchasing already well ranked facilities across the country, with practicing physicians as partners, and then implementing best practices and capitalizing on purchasing and operational synergies, MFC can create additional value for shareholders.”

In a research update to clients today, Linsdell maintained his “Buy” rating on Medical Facilities Corp. but raised his one-year price target on the stock from $17.00 to $17.50, implying a return of 28.7 per cent at the time of publication.

Linsdell thinks DR will generate EBITDA of (US) $113.4-million on revenue of $418.1-million in fiscal 2018. He expects those numbers will improve to EBITDA of $119.1-million on a topline of $431.5-million the following year.