There’s a ton of upside to Akumin, says Clarus

It’s a good time to be buying US healthcare stock Akumin Inc (Akumin Stock Quote, Charts, News, Analysts, Financials NASDAQ:AKU), according to Clarus Securities analyst Noel Atkinson. Akumin is down about 68 per cent over the past 12 months, but a new cash injection has Atkinson raising his target price on Monday from $6.50 to $6.75 per share, good for a projected return of 777 per cent at the time of publication.

One of the largest providers of radiology imaging and oncology treatment services companies in the United States, Akumin has 234 owned and/or operated centres along with outpatient radiology and oncology solutions to about 1,000 hospitals and health care systems across 48 states. 

Akumin delivered a business update this past Friday where it spoke of some of the company’s growth initiatives as part of a broader transformation program related to operational features such as patient access and experience, customer and partner engagement, financial sustainability and employee well-being. On the one hand, Akumin replaced its Chief Financial Officer William Larkin with a new CFO in David Kretschmer and, on the other hand, management announced the sale of certain accounts receivables by subsidiaries of the company for proceeds of about $30 million. (All figures in US dollars.)

“Our transformation efforts to date have already resulted in significant efficiencies to our operations and show a positive momentum for further efficiencies, as discussed in our second quarter results,” said Chairman and CEO Riadh Zine in a press release. “The sale of certain accounts receivables has significantly improved the liquidity of our Company by an immediate cash infusion of approximately $30 million and a reduction in our days sales outstanding of our accounts receivables.”

Commenting on the update, Atkinson said the accounts receivables sold are likely at Akumin’s imaging centres in Georgia and Florida, with a healthy one-time gain likely to show up in the company’s third quarter results. Atkinson stressed that the move doesn’t mean Akumin is exiting its relatively high-margin business in those states.

“These receivables have a long expected life, but the Company had to write down the expected value repeatedly over the past couple of years. Now that the law courts are back up and running after COVID, we would expect these receivables to have a more substantial value than what they carried for on AKU’s balance sheet,” Atkinson wrote.

On the on-boarding of Kretschmer, Atkinson said the new CFO has extensive executive experience with large healthcare companies and he adds “some serious bench strength” for the company’s financial reporting and corporate transformation.

Atkinson said the C-Suite move continues on Zine’s efforts to reform the company in the wake of last September’s merger with radiology and radiation therapy services company Alliance Healthcare Services.

“Mr. Zine appears to be heavily focused on maximizing operating efficiencies across the Akumin/Alliance platform, and this addition brings some serious bench strength for financial reporting and corporate transformation. Mr. Larkin follows former President and co-CEO Rhonda Longmore-Grund out the door as Mr. Zine builds his own team (rather relying on the legacy Alliance team) to drive the next stage of growth,” Atkinson wrote.

With Akumin’s update, Atkinson has made no changes to his 2022 and 2023 estimates but  said the $30-million cash addition and some slight tweaks to his outlook were the prompts for his target raise. Atkinson has paired his new $6.75 target with a reiterated “Buy” rating. 

In comparison with 2021’s revenue of $421.1 million, Atkinson is calling for Akumin to generate 2022 and 2023 revenue of $762.7 million and $801.9 million, respectively. On adjusted EBITDA, Atkinson sees Akumin going from $66.9 million in 2021 to $155.8 million in 2022 to $203.8 million in 2023.