Rapid growth in the near term followed by higher margins is the prescription for Well Health Technologies (Well Health Technologies Stock Quote, Chart TSXV:WELL), according to analyst Justin Keywood of GMP Securities, who on Friday raised his target price for WELL from $1.00 to $1.15 per share.
“We see WELL as offering an M&A driven, high growth health-tech platform with a solid management team to support shareholder value creation. 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,” says Keywood.
The analyst upped his target based on the company’s execution but also due to the recent purchase of KAI Innovations, Canada’s largest OSCAR EMR (electronic medical records) provider and the recent private placement for $10.5 million. Keywood says the acquisition puts WELL at a six per cent market share in the EMR market in Canada, behind only Loblaw at 27 per cent and Telus Health at 44 per cent.
“EMR acts as a doctor’s operating system and is extremely sticky software with high recurring revenue. As a result, these assets are very strategic, supported by Loblaw acquiring QHR in 2016 for $170 million at 5x sales and 40x EBITDA. The acquisition is also consistent with our thesis of WELL expanding its health-tech platform in valuable synergistic areas,” says Keywood.
The analyst thinks WELL will generate fiscal 2019 revenue and EBITDA of $30.8 million and negative $1.9 million, respectively, and fiscal 2020 revenue and EBITDA of $41.1 million and $1.1 million, respectively. Keywood is reiterating his “Buy” rating with the $1.15 target, which represents a projected return of 26.2 per cent at the time of publication.