There’s even more upside in store for Well Health, says Beacon Securities

Well Health Technologies (Well Health Technologies Stock Quote, Chart TSXV:WELL) has been a grade A performer over the first half of 2019, but there’s more where that came from, according to Beacon Securities analyst Gabriel Leung, who on Tuesday reiterated his “Buy” recommendation and increased his target price from $0.90 to $1.00 per share on the back of strong execution to date by management along with greater visibility on near-term operational results.

Vancouver-based healthcare tech and clinic owner Well Health announced earlier this month both the closing of a $10.5-million convertible debenture and the purchase of Ontario-based electronic medical records (EMR) company KAI Innovations for about $10.75 million. The latter, which consists of $6 million in cash, $2 million in shares priced at $0.705 per share and a cash payment of $2.75 million to be paid in the first year after closing, gives WELL a larger chunk of Canada’s EMR market, putting it at six per
cent of market share, behind only Loblaws at 27 per cent and Telus Health at 44 per cent.

Leung says that with the KAI buy, Well Health now has digital revenues (mostly recurring) of about $5 million with about $1 million in EBITDA, representing 20 per cent of the company’s top line. Post transaction, WELL will have about $5 million in cash against $10.5 million in debt and about 95 million in basic shares outstanding.

“Overall, we view the pending acquisition of KAI as representing a key milestone for Well as it catapults the company into the third largest EMR provider in Canada behind Telus Health and Loblaws/QHR. It also expands Well’s corporate footprint into Ontario, which we believe will lead to additional acquisitions in the region (most likely healthcare clinics),” says Leung.

The analyst has updated his estimates to reflect the closing of the financing round and the pending close of the KAI purchase. He is now calling for fiscal 2019 revenue and EBITDA of $29.0 million and negative $0.5 million, respectively, and fiscal 2020 revenue and EBITDA of $36.5 million and $2.1 million, respectively.

Leung’s $1.00 target represented a projected return of ten per cent at the time of publication.

Disclosure: Jayson MacLean and Nick Waddell of Cantech own shares of WELL and the company is an annual sponsor of the publication.

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