Haywood Capital Markets analyst Colin Healey is still feeling good about WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News, Analysts, Financials TSX:WELL), reiterating a “Buy” rating and Top Pick Status for WELL along with a maintained target price of $12.00/share in an update to clients on Thursday.
An omni-channel digital health company with a number of business segments and operations in Canada and the United States, Vancouver-based WELL Health has put an emphasis on acquiring digital and physical healthcare assets since pivoting to the field in 2018, largely acquiring properties through various mergers and acquisitions.
Healey’s latest analysis comes after WELL Health announced its intent to acquire Aware MD, a cardiology-specific outpatient electronic medical records (EMR) company and the developer of the Cerebrum proprietary workflow solution, a clinical software for numerous disease specialties designed for specialists to manage busy and multi-diagnostic practices. Aware currently supports approximately 400 specialists with 2.5 million patients.
“The acquisition is synergistic for WELL who will add Cerebrum to its suite of Canadian EMR solutions, which currently include Oscar PRO and IntraHealth’s Profile,” Healey said.
WELL Health will pay $4.5 million cash upfront upon the acquisition closing, with total considerations potentially reaching $8 million. Under the terms of the agreement, Aware MD will become a WELL EMR Group subsidiary and will continue to be operated by its current staff led by Drs. Galina and Anatoly Langer, both of whom are both licensed cardiologists.
Aware MD generated $2 million in revenue over the last year while producing positive EBITDA and double-digit growth rates. The Cerebrum platform is familiar to the WELL Health family, as its MyHealth subsidiary was an early adopter of the software, which provides practitioner tools (including customizable consultation reports and test reporting modules), appointment management, document management, workflow management, and practice business management tools.
Cerebrum is also the only software to fully incorporate all of the cardiology requirements as per Ontario Association of cardiologists and OntarioMD specifications.
“The proposed acquisition of Aware MD builds on WELL’s EMR business unit with a product that has dominant market share amongst Cardiologists in Canada’s largest province and positions WELL to better support Cardiology practitioners across Canada,” said Hamed Shahbazi, CEO and Founder of WELL, in the company’s September 23 press release.
“Adding Cerebrum, a best-in-class EMR to WELL’s practitioner enablement platform for key specialities is an exciting development. Cerebrum also powers our MyHealth business which houses the largest group of practicing cardiologists in Ontario. The integration of clinical services from MyHealth and Aware MD technology will further enhance the depth and usefulness of Cerebrum and allow WELL to innovate and better support specialists,” Shahbazi said.
Healey believes the company will remain aggressive on the acquisition front in the name of meeting its goals for this year.
“Given the dry powder on the balance sheet and WELL’s robust pipeline of targets, we expect the probability of upward adjustment to our 2021/22 forecasts remains high,” Healey noted.
According to Healey, the company has $70 million in cash available compared to $184 million debt to go with a market capitalization of $1.6 billion and enterprise value of $1.8 billion.
The Aware MD acquisition is the ninth for WELL Health in 2021 and it follows the company’s announced intent to acquire a majority stake in WISP, Inc., an American telehealth and e-pharmacy outlet specializing in women’s health with a current annualized run-rate of approximately US$30 million, for approximately US$41 million including US$27.7 million in cash, along with a future conditional earn-out of up to US$7.4 million.
In addition, the company also announced that its common shares will be added by Dow Jones Canadian Index Services to the S&P/TSX Composite Index as of September 20.
Healey projects 2021 to be a breakout year for WELL Health, with a revenue projection of $278.4 million representing a potential year-over-year increase of 455 per cent. He also expects the company’s EBITDA to break positive in 2021 at a projected $55.7 million, producing a margin of 20 per cent. However, Healey’s EPS projection remains negative for 2021 at a forecasted loss of $0.16/share.
With such a steep growth curve in play for the company, Healey believes WELL Health is a solid investment on account of strong management and evolving technical offerings.
“WELL continues to evolve, rapidly growing its revenue, market footprint and underlying financial metrics organically and through its acquisition strategy,” Healey said. “Following the recent close of a slew of acquisitions, WELL still has around $70 million in cash to continue consolidation with multiple LOIs currently in place. We expect the company, with a current annualized run rate of about $400 million in on track for topline growth in excess of 450 per cent in 2021 and even more in 2022. On that basis, we continue to like WELL, underpinned by strong management and evolving technical offerings.”
Overall, WELL Health’s stock price has dropped by 10.5 per cent for the year to date, reaching a high point of $9.23/share on February 24. At the time of publication, Healey’s $12.00 target represented a projected one-year return of 57.1 per cent.
Disclaimer: Nick Waddell owns shares in WELL Health Technologies and WELL is an annual sponsor of Cantech Letter.