Viemed Healthcare has price target cut at Beacon, keeps “Buy” rating

A huge market opportunity awaits Viemed Healthcare (Viemed Healthcare Stock Quote, Chart, News TSX:VMD), according to Beacon Securities analyst Doug Cooper, who at the same time is taking a more conservative outlook on the company.

In an update to clients on Friday, Cooper maintained his “Buy” rating but dropped his target from C$13.00 to C$9.00 per share.

Viemed Healthcare is a home medical equipment supplier for patients dealing with various respiratory illnesses including COPD and neuromuscular diseases.

Based in Lafayette, Louisiana, the company has wholly-owned subsidiaries Sleep Management and Home Sleep Delivered and aim to address the 25-million market in US patients diagnosed with COPD.

Viemed reported its fourth quarter and year end 2019 financials on March 3, posting revenue growth for the Q4 of 29.5 per cent year-over-year and 5.3 per cent sequentially to $21.5 million. Adjusted EBITDA for the quarter was up 16 per cent year-over-year and 11.4 per cent sequentially to $5.6 million, representing a 26.4 per cent margin. (All figures in US dollars except where noted otherwise.)

2019 saw Viemed increase its active patient count by 31 per cent over the previous year with revenue per patient relatively flat at $11,500.

CEO Casey Hoyt pointed out in the press release that it was another record revenue and adjusted EBITDA year in 2019.

“While the financial results are impressive, I am equally as pleased with the continued development of our internal platform to accommodate additional growth in the future of our business. We continue to invest in programs that are focused on the best care for our patients, and that mission is designed to result in organic growth in the future,” said Hoyt.

Cooper called the quarterly results strong, especially on EBITDA margin and especially liked the progress in terms of patient count related to the company’s non-invasive ventilation (NIV) therapy.

“As the company continues its education process with the medical community, driven by clinical data last presented at the CHEST conference and should be published in Q2, we believe more and more patients will continues to be prescribed NIV therapy. There is no question in our mind that it satisfies an unmet clinical need and with 1.3 million stage 4 COPD patients, there continues to be a huge market opportunity,” Cooper wrote.

“Furthermore, VMD announced that it has been approved as a vendor with [US Veterans Affairs]. The recent passage of the Mission Act is providing more support for ailing veterans. We have noted in the past that the VA has nine million patients with ~500,000 of them late-stage COPD. We believe the company will expand it education process to VA doctors, which should bear fruit later this year or early next,” Cooper said.

VMD fell sharply on the release of the quarterly and yearly numbers and is now down over 50 per cent from its high in late October, but Cooper says that based on the company’s results this quarter and opportunity for strong growth in fiscal 2020, the share price drop is unwarranted.

The analyst has revised his forecast for Viemed based on the company’s new accounting methodology and his own more conservative outlook, now calling for fiscal 2020 revenue and EBITDA of $97.3 million and $25.2 million, respectively.

Cooper’s C$9.00 target at press time represented at a projected 12-month return of 64 per cent.