Clarus Securities analyst Noel Atkinson is staying bullish on US medical tech company Akumin (Akumin Stock Quote, Chart, News NASDAQ:AKU), saying in an update to clients on Wednesday that even with the share price rally AKU is still good value compared to its industry peers.
Florida-based Akumin, an owner/operator and manager of nearly 130 freestanding medical imaging centres in seven states including Florida, Georgia and Texas, on Tuesday announced a business update including preliminary third quarter numbers. The company said it completed an estimated 1.485 million relative value units (RVUs), a unit of measure for procedure volume, in its third quarter. That amount would represent a 36 per cent increase over the previous quarter.
“Taking into account the third quarter RVUs above, on a last twelve-month (LTM) basis, Adjusted EBITDA for the LTM period ended June 30, 2020 would have been approximately $74 million after normalizing for the effects of COVID-19 on our business and operations,” the Akumin press release said.
Atkinson said the 1.485 million RVUs would be above his Q3 forecast of 1.293 million and even above his fourth quarter estimate, showing a strong rebound in patient volumes even as Akumin’s key markets in Florida and Texas continue to deal with high infection rates for COVID-19.
Also on Tuesday, Akumin announced an offering of five-year term notes, which should help pay off its outstanding bank credit facility where the principal stood at $366 million as of the end of June, according to Atkinson.
With the preannounced Q3 figures, Atkinson has now raised his 2020 estimates, calling for 2020 revenue of $266.7 million (previously $254.2 million) and adjusted EBITDA of $63.2 million (previously $62.1 million). For 2021, the analyst thinks AKU will generate revenue of $307.0 million and EBITDA of $83.4 million.
Akumin’s share price has now almost completed the recovery of losses taken during the general market downturn in February and March, with the stock currently sitting at negative three per cent year-to-date.
Atkinson thinks there’s more life to AKU going forward. Comparing Akumin with its US-based peers in diagnostic medical testing services, the analyst has AKU at 9.5x his 2020 EV/adjusted EBITDA estimates and at 7.2x his 2021 estimates versus the peer group average at 11.0x 2020 EV/adjusted EBITDA and 9.4x 2021 estimates. Atkinson noted that key comparable RadNet currently trades at a consensus multiple of 12.2x 2020 EV/adjusted EBITDA and 8.5x 2021 numbers.
“We believe our target multiple is reasonable given the current valuations of RadNet and the wider peer group. We expect Akumin to achieve relatively stronger revenue growth and much higher Adj. EBITDA margin in both 2020 and 2021 than RadNet, but RadNet is considerably larger than Akumin in terms of locations, revenue, and total Adj. EBITDA,” Atkinson wrote. “Both companies have similar multiples of net debt to 2021e Adj. EBITDA.”
“Akumin has been showing good progress in upgrading the quality of its capital stack, including the recent NASDAQ listing and the current term notes offering. We continue to expect Akumin’s share price to close the valuation gap with RadNet as more U.S. investors learn about Akumin’s profitability and solid operating history,” Atkinson said.
With the update, Atkinson reasserted his “Buy” rating and $6.00 target, which at press time represented a projected 12-month return of 66 per cent.