Following the news that Reliq Health Technologies (Reliq Health Stock Quote, Chart TSXV:RHT) will restate its financials due to revenue collection issues, Beacon Securities analyst Gabriel Leung has pulled his rating and price target on the stock and placed it Under Review.
This morning, Reliq announced that following a review conducted by its audit committee it would restate its fiscal Q3 financials after determining that the timing and certainty of receiving the revenue invoiced to clients is substantially unclear, due to the clients’ issues
with securing reimbursement from the payor.
“It is unfortunate that there has been such a steep learning curve for both Reliq and our clients in South Texas in terms of the claims submission process, but we have been working hard to address this issue and improve revenue collection going forward,” CEO Dr. Lisa Crossley said. “Many of the challenges the company has faced in South Texas relate to the highly manual nature of the current clients’ internal processes. We are building out new capabilities in our platform to help automate the critical components of these processes, including eligibility screening, creation and approval of care plans and billing code selection. Management expects to have all of the necessary tools in place later this quarter to allow the company to move forward successfully.”
Leung says he believes the client in question revolves primary around Paz Home Health LLC, which he believes is Reliq’s largest customer by previously reported revenue) and thinks the payor is Center for Medicare & Medicaid Services (i.e. CMS). The analyst says this development is cause enough to pull his previously bullish price target and rating on the stock.
Reliq Health Stock Under Review
“Given the current high concentration of previously booked revenues tied to Paz Home Health (which we believe is the group impacted by the receivable collection uncertainty), along with overall uncertainty around CMS reimbursement, we have suspended our estimates and target and placed our rating Under Review (previously Spec. Buy and $2.70 target price),” the analyst said in a report to clients today.
Leung says this was a risk he was watching.
“As we highlighted in our initiation report and subsequent reports, CMS reimbursement and receivable collection represented key risks to this story, which has clearly materialized,” he adds. “Interestingly, the company did note during the last quarterly call that although receivables had increased that it had collected $592k subsequent to quarter-end (its unclear to us now whether that’s the case based on today’s announcement).”