A new financing round has helped shore up the balance sheet for CareRx Corp (CareRx Corp Stock Quote, Charts, News, Analysts, Financials TSX:CRRX), according to Echelon Capital Markets analyst Stefan Quenneville, who provided an update to clients on the company on Thursday.
CareRx, Canada’s leading provider of pharmacy services to seniors care centres such as long-term care homes, with over 1,600 elderly care facilities currently served through its network of pharmacy fulfillment centres, announced on Wednesday that it has closed on $12.1 million of its previously announced $17.2 million equity raise, including an $8.1 million bought deal public offering and the first $4.0 million tranche of the $8.0 million concurrent private placement, both at $2.70 per share.
The second $4.0 million tranche is expected to close by the end of February. The $8.0 million private placement is being allocated to CareRx long-time strategic investor, Yorkville Asset Management. CareRx said the money will go towards paying down debt, for working capital and for general corporate purposes.
Looking at the financing, Quenneville said while it provides CareRx with the ability to streamline its debt profile, the move comes with some share dilution. As a result, the analyst reiterated his “Buy” rating on the stock but lowered his target price from $7.25 per share to $6.75 per share, representing at press time a projected one-year return of 162 per cent.
“We maintain our Buy Rating as we continue to believe CRRX remains compelling value for long-term investors given its competitive position, abundant organic and inorganic growth opportunities, and margin expansion potential,” Quenneville wrote.
Quenneville made no material changes to his forecast, calling for full 2022 revenue and adjusted EBITDA of $381.9 million and $30.6 million, respectively, and moving to 2023 revenue and EBITDA of $389.2 million and $38.1 million. Adjusted EPS for CRRX is pegged at negative $0.71 per share for 2022 and negative $0.04 per share for 2023.
“We continue to value CRRX using an 11x 2023 EV/EBITDA multiple, which is in line with where the Company’s North American peers typically trade and, given that CRRX currently trades at 5.8x, we are maintaining our Buy rating and believe that the stock represents compelling value at current prices,” Quenneville said.
With a market capitalization of about $122 million, CRRX finished the 2022 year down 55 per cent, while so far in 2023 the stock is about even for the year.