Big things are coming for WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News TSXV:WELL) says Beacon Securities analyst Gabriel Leung.
In a research update to clients today, Leung maintained his “Buy” rating and one-year price target of $2.00 on WELL, which implied a return of 41 per cent at the time of publication.
Leung today said he has revised his estimates on WELL to include three recent acquisitions, OSCARwest, which closed December 2, Spring Medical Center, which closed the same day, and Trinity Healthcare Technologies, which is expected to close mid-January.
The analyst said WELL, which has been a top performing stock on the TSX Venture Exchange this year is beginning to fill in the value beneath its share price in a swift manner.
“Operationally, we believe the company is progressing well with the optimization of its clinical portfolio well underway (i.e. digitizing manual processes like booking appointments and also introducing non-insured services),” Leung said. “We also believe the company is in the early stages of up-selling additional software products and corporate shared services (i.e. HR, accounting, IT) into its digital portfolio customer base and expect more data points around this in CY20.”
The Beacon Securities analyst says he expects a big bump in the company’s topline.
From a growth perspective, we believe that, over the near-to-midterm, Well has aspirations to grow its digital portfolio, specifically its OSCAR EMR service reach to ~2,000 clinics (up from ~1,446 currently),” he added. “Furthermore, we believe it is looking to double its clinical portfolio from 20 to 40. Pro-forma, we believe this would take the company to ~$80M in top line revenues and could be financed with its pro-forma $12M in cash on the balance sheet (keeping in mind the company uses cash/shares/earnouts to fund acquisitions). At this level of revenues, we believe the company could start to show good operating leverage as costs associated with its corporate shared services should be well covered. We believe this will be a key milestone for the company as it will put it in a self-funding position.”
Leung thinks WELL Health will post EBITDA of negative $1.4-million on revenue of $32.3-million in fiscal 2019. He expects those numbers will improve to EBITDA of positive $1.0-million on a topline of $40.3-million the following year.
WELL’s largest recent acquisition was announced on November 21, when it picked up OSCAR (“Open Source Clinical Application Resource”) EMR software company Trinity Healthcare for approximately $7.22-million, marking the comapany’s fifth pickup in the OSCAR space.
WELL Health now owns 19 medical clinics and provides digital services to some 852 more throughout Canada.
Disclosure: Cantech’s Nick Waddell and Jayson MacLean own shares of WELL Health Technologies and the company is an annual sponsor of Cantech Letter.