Skylight Health is one to watch in 2021, says Beacon Securities

There are a lot of catalysts on the horizon for Skylight Health Group (Skylight Health Group Stock Quote, Chart, News, Analysts CSE:SHG), according to Beacon Securities analyst Gabriel Leung, who delivered a corporate update to clients on Monday, saying with its acquisitive mindset 2021 should be quite eventful for Skylight.

The former CB2 Insights, Skylight Health operates a US multi-state health network of multi-disciplinary medical clinics providing services including primary care, sub-specialty, allied health and laboratory/diagnostic testing along with telemedicine capabilities.

Skylight on December 30th announced the closing of a previously announced bought deal offering of 13.8 million shares at $1.00 per for gross proceeds of $13.8 million. The company plans to use the money for M&A and general corporate purposes.

“We are pleased to see the strong demand and support from this sophisticated group of investors who share our vision of working diligently, yet aggressively, to advance our company from these early growth stages with highly accretive, strategic, and profitable acquisitions,” said Prad Sekar, Co-Founder and CEO, in a press release.

Skylight also announced on December 30 closing on its acquisition of Tennessee-based Perimeter Pain and Primary Care Clinic, a medical practice servicing over 12,000 patients per year with primary care, chronic pain management, interventional procedures, weight management, regenerative medicine and aesthetics, with services primarily reimbursed through private and public payors. The Cookeville, Tennessee, company generated $2.2 million in revenues and $400,000 in EBITDA in 2019, while Skylight paid $1.03 million in cash for the business.

On the new financing, Leung estimated Skylight’s cash position to now be about $18 million against debt of about $900,000 and its basic shares outstanding at about 174 million.

With the update, Leung has retained his “Speculative Buy” rating on Skylight but lowered his target price from $1.65 to $1.55 based on dilution from the recent financing. At press time, Leung’s target, which comes from a 12x calendar 2021 EV/Sales multiple (which is in line with its peer group, according to Leung) represented a projected 12-month return of 32 per cent.

“We expect 2021 to be an exciting year for Skylight as it continues to pursue accretive acquisitions, which expand its geographic footprint and service offering. We also expect to see evidence of the company’s ability to drive revenue accretion from its existing patient roster through the introduction of insured services.

Leung noted that Skylight announced five acquisitions in the fourth quarter 2020 alone.

On the Perimeter acquisition, Leung said, “Perimeter is expected to leverage Skylight’s telemedicine infrastructure to provide access to patients across the State of Tennessee. Meanwhile, services offered by Perimeter will apply to Skylight’s entire patient base, which should help to increase revenue per patient over time.”

For the full 2020 year, Leung is calling for Skylight to generate $13.3 million in revenue and $0.1 million in EBITDA and for 2021 he is estimating $25.4 million in revenue and $2.3 million in EBITDA.

Skylight on Monday announced receipt of final approval to list on the TSX Venture, starting on January 6, 2021, under the ticker SHG.

On December 31, Skylight provided a corporate overview of the past 12 months, highlighting its three financings over the year, which raised over $22 million and involving over 11 institutions in the US and Canada, along with five new clinical acquisition announcements that in aggregate add annualized revenue of about $13 million and $2.5 million in EBITDA. The company now provides care to over 135,000 patients across 15 states.

“2020 has been nothing short of a transformative year for the Company,” said Sekar in a press release. “Delivering adjusted EBITDA positivity, strengthening of our balance sheet with cash and extinguishing long-term debt, and adding strong revenue and profitability growth as we exit 2020 should make all of us at Skylight and amongst our shareholders and other stakeholders feel proud and excited for the year ahead.”

Skylight said it will execute against its three-pronged growth model in 2021, which involves strategic acquisition, organic growth and expansion of its subscription-based services. The company said the US healthcare market, a multi-trillion-dollar sector, is ripe for disruption and it sees more than 200 potential acquisition opportunities at any given time which would be ideal additions to Skylight.

“Incremental to each acquisition, the Company employs a proven multi-disciplinary platform backed by 25-plus years of founder led clinical management expertise, to enhance the existing base of clinical revenue and broaden the offerings available within each clinic. The Company’s clinic network will offer primary care services. Additional services will be based on each population set in each region and will complement the healthcare needs of patients,” Skylight said.

Since its debut at $0.70 per share on November 30, 2020, Skylight has climbed as high as $1.35 and is currently trading at $1.17.