Viemed Health has more upside still, says Beacon Securities

COVID-related equipment sales are driving the outlook for home respiratory services company Viemed Health (Viemed Health Stock Quote, Chart, News TSX:VMD), says Beacon Securities analyst Doug Cooper, who reviewed Viemed’s quarterly results in an update to clients on Tuesday.

Cooper kept his “Buy” rating but raised his 12-month target to $15.50 (was $12.50). Viemed, whose home medical equipment supply businesses provide post-acute respiratory care services in the United States, released on Moday its first quarter results ended March 31, 2020. The company posted net revenues of $23.8 million, representing a 31 per cent increase year-over-year, while growing its active ventilator patient base for the quarter by about 25 per cent compared to by just three per cent over Q4 2019.

During the health crisis, Viemed has been helping health jurisdictions in the US transition patients with chronic respiratory failure and other issues out of hospitals and into homecare environments so as to free up hospital beds for COVID-19 patients. In his quarterly commentary, Viemed CEO Casey Hoyt said the first quarter of 2020 showed “how important the Viemed mission is to the future of our country’s healthcare system.”

“Our clinicians have come through to share their expertise with others to assist with COVID-19 solutions. In addition, we have established long-term relationships with hospitals and physicians that we expect will only be strengthened in the future as we continue to do our part in supplying ventilators and keeping hospital beds free for the patients who have become ill with the coronavirus,” Hoyt said.

Cooper called the quarterly results strong and in-line with the company’s previously updated guidance and noted that revenue per patient (excluding COVID-19’s impact) was up one per cent year-over-year and driven by an increase in non-ventilator revenue, which now represents 17.5 per cent of the company’s revenue compared to just 10.5 per cent a year earlier.

Cooper said the change represents positive diversification which will help create long-term sustainable growth for Viemed.

“The company also gave a very strong outlook for Q2 revenue of $42-$44 million driven by ~$20 million of COVID-related equipment sales. While VMD did not provide EBITDA guidance, we would suggest that such revenue should result in EBITDA of ~$12 million, which would be +200 per cent year-over-year,” Cooper wrote.

Cooper noted that one of the benefits to Viemed of the current healthcare crisis is the deepening and forging of new relationships between VMD and hospitals and the medical community across the United States, seeing as it is those groups that will continue to refer patients to Viemed now and in the future.

“Through COVID, those doctors now better understand the efficacy of non-invasive ventilation – a learning curve that has been shortened from years to months. As the pandemic recedes, we believe those relationships that VMD has formed will pay huge dividends in the form of accelerating patient referrals,” Cooper said.

With the quarterly results, Viemed management also gave a strong outlook for Q2, calling for $42 to $44 million in revenue and driven by about $20 million in COVID-related equipment sales.

With his update, Cooper has revised his estimates, now calling for 2020 revenue and EBITDA of $115.0 million and $32.6 million. At the time of publication, his new $15.50 target represents a projected return of 63 per cent.

Shares of Viemed have climbed from a low of $3.83 on March 16 to close at $9.50 Tuesday.