The stock has come off quite a bit over the past half-year but investors looking to get into the telemedicine and online health services space should be thinking about WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL). So says portfolio manager John Zechner who likes WELL’s early positioning within the still-developing teleheath sector.
“We started looking at this one because, obviously, consulting online health services has been a huge growth area. This stock had run up pretty hard. It went from almost nothing to a peak of almost $9 last year and recently it’s pulled back to under $4,” said Zechner, Chairman of J. Zechner Associates, who spoke on BNN Bloomberg on Monday.
Vancouver-based WELL Health has roots back to when it was an owner-operator of primary healthcare facilities in British Columbia, with the company solidifying its aim and direction in 2018 when it took on Hamed Shahbazi as CEO and closed on a $7.6-million financing round let by Hong Kong investor Li Ka-shing. Then known as Wellness Lifestyles, the company changed to WELL Health Technologies and started building out its stable of primary care clinics and developing its electronic medical records (EMR) business.
The market began to take notice a year later when the stock went from under $0.50 per share to $1.50 by the end of 2019 and then made another quantum leap in 2020, rising above the $8.00 mark. With a virtual healthcare platform in Canada and telehealth assets in the US, WELL made its biggest purchase last year in US-based gastroenterology and anesthesia company CRH Medical, bought for US$372.9 million.
Now with a market capitalization just under $1 billion, WELL’s share price started drifting lower mid-last year as the market began turning away from the more growth-oriented corners of the market. Currently, WELL is down about 48 per cent over the past 12 months and so far in 2022 is down about five per cent.
But Zechner says he’s keeping an eye on WELL as it’s a player in one of the market’s growth areas.
“We were on a conference call with management last week, so I got a little more of the story and the background,” he said. “They’ve got some debt on the balance sheet which always gets me a little concerned on a younger growth-oriented company that doesn’t have the great cash flow necessarily. But these guys could end up one of the better positioned in Canada in terms of online health services which is a huge growing area and you want to be positioned in an area like that in a portfolio.”
“Whether this is the go-to name in the end it’s still maybe a little too early to tell, but it seems like it’s the larger player right now and it’s doing quite well,” Zechner said. “It’s got some good tuck-in acquisitions and is generating positive cash flow and the valuation has come down.”
“We don’t own it yet, but it’s clearly on my radar screen. I’m having a closer look and follow it now,” he said.
WELL Health provided a business update a few weeks ago, saying the preliminary fourth quarter numbers have the company closing out 2021 with an annualized revenue run-rate of over $450 million and an annualized operating Adjusted EBITDA run-rate just under $100 million. WELL said its omni-channel patient services and virtual care services were seeing strong organic growth and that business at WISP, a US-based telehealth and e-pharmacy company specializing in women’s health, had also contributed to the revenue lift. WELL acquired a majority stake in WISP this past October.
“We are very pleased to provide this update to shareholders as WELL’s business has never been stronger as evidenced by our solid patient visit metrics, a key leading indicator of our financial performance and profitability given the historically resilient per unit economics of our patient services business,” said Shahbazi in a press release.
“With our strong balance sheet and positive cash generation profile, WELL is favourably positioned to continue to grow both organically and inorganically. We believe revenue, Adjusted EBITDA and cashflow are key metrics to watch as we expected them to continue to rise on a per share basis. We are looking forward to reporting our Q4 and full year financials, which we believe will continue to demonstrate continued strong financial performance and cashflow generation metrics,” he said.
With WELL’s stock down by almost half, WELL also recently announced its share buyback program would be reactivated following the release of the fourth quarter 2021 results, saying its Board believes the recent market prices for WELL “do not properly reflect the underlying value” of the shares.
Disclosure: Jayson MacLean and Nick Waddell own shares of WELL Health Technologies and WELL is an annual sponsor of Cantech Letter.