A third investment bank has initiated coverage of WELL Health Technologies (WELL Health Technologies Stock Quote, Chart TSXV:WELL), this time with a street high target of $1.00.
GMP Securities analyst Justin Keywood today launched coverage of WELL with a “Buy” rating. The $1.00 price target implied a return of 53.8 per cent at the time of publication.
The analyst outlined his investment thesis on the stock, which he says has the building blocks in place to go “much higher”.
“We see WELL as offering an M&A driven, high growth health-tech platform with a solid management team to support shareholder value creation,” Keywood says. “WELL is anticipated to add several more clinics to its network of 19, while ramping up digital operations and SaaS revenue. This provides a unique business model and competitive advantage, where the network of clinics contribute steady revenue and cash flow but also valuable data with a patient base in place. WELL can test and develop technologies in almost a lab-type environment before further expansion. As WELL’s digital operations ramp up with greater scale from more clinics, we forecast significant growth and profit expansion, leading to a much higher stock price. WELL is also building long-term strategic value, where its operations could be attractive to potential acquirers.”
The analyst says there a five key reasons for his bullish take on WELL’s future. First, he says the company should add scale in the form of acquired or self-built clinics. Next, he says the company is set to acquire tech assets that will lead to a platform offering that should deliver a higher stock multiple. Third, Keywood says the company, with approximately 600,000 annual patient visits, is in the unique position to test data before expansion. His fourth point is that WELL will also enjoy organic expansion, both here and possibly into the United States. Lastly, the analyst says the company has strong management and strategic value he says could easily attract private equity or larger strategic companies.
Keywood thinks WELL will post EBITDA of negative $1.7-million on revenue of $27.5-million in fiscal 2019. He expects those numbers will improve to EBITDA of positive $700,000 on a topline of $35.2-million the following year.
“WELL is a unique company with an M&A driven health-tech growth strategy and patient base already in place,” the analyst adds. “We expect WELL to evolve more into a healthcare technology firm over the next several years, leading to a multiple re-rating. In determining an appropriate target valuation multiple for WELL, we compare it against healthcare services and related companies, along with more pure play healthcare technology firms. In this regard, WELL has low valuation at 2.3x forward sales, in line with healthcare services companies but far below healthcare technology
firms at 3.7x.”
Disclosure: WELL Health Technologies is an annual sponsor of Cantech and Cantech’s Nick Waddell owns shares of the company.