Viemed Health scores with new acquisition: Beacon

Shares of Viemed Healthcare (Viemed Healthcare Stock Quote, Charts, News, Analysts, Financials TSX:VMD) are popping again this week after news came of the company’s first acquisition in Tennessee-based Home Medical Products. Looking over the deal was Beacon Securities analyst Doug Cooper, who in a Wednesday report said Home Medical has a strong margin profile and will make a nicely accretive addition to Viemed.

Headquartered in Lafayette, Louisiana, Viemed Healthcare is a home respiratory services provider to patients with respiratory illnesses such as COPD and a number of neuromuscular diseases. The company announced on Tuesday a definitive agreement to acquire Home Medical Products, with operations in Tennessee, Alabama and Mississippi, for $31.75 million. The acquisition is expected to close on June 1, 2023.

“The purchase of HMP will launch our acquisition growth initiatives with a stellar organization that has an extraordinary reputation with patients, payors, and physicians,” said Viemed CEO Casey Hoyt in a press release. “Above all, the team at HMP shares our same driving passion for innovative patient-focused care.”

On the deal, Cooper said even though Viemed already has a presence in HMP’s three states, it does not have a strong one in either Tennessee, northern Alabama or Mississippi, and thus, the acquisition adds geographic diversification to VMD. Moreover, the analyst noted that those three states have a much higher than the national average preponderance of COPD, making for excellent industry dynamics.

“This is Viemed’s first acquisition and it looks like a very good one,” Cooper wrote. “We expect it to be accretive to EBITDA per share by ~19 per cent (i.e., $0.18 for the
acquisition on a Q4/FY22 run-rate of $0.96 per share).”

On HMP’s earnings, Cooper said Medical Products had a 24 per cent EBITDA margin last year ($6.8 million), with a strong recurring re-supply business in its sleep segment. The company’s revenue breaks down to about 50 per cent sleep (CPAP products), 13 per cent non-invasive ventilators (NIV) and 14 per cent Durable Medical Equipment (wheelchairs, hospital beds, etc.) 

Cooper said HMP’s lineup will further diversify VMD’s revenue, which currently is at about 66 per cent NIV and 34 per cent sleep products.

“We believe VMD can help bring its expertise to grow its NIV business. While sleep should keep growing, VMD’s goal would be to grow NIV to 15-20 per cent of total revenue, which would imply NIV growth of ~35-40 per cent,” Cooper said.

The analyst is now calling for Viemed to deliver 2023 and 2024 revenue of $186.2 million and $225.1 million, respectively, and 2023 and 2024 EBITDA of $45.6 million and $57.0 million, respectively. (All figures in US dollars except where noted otherwise.)

Cooper has maintained a “Buy” rating and raised his target on VMD from C$18.00 to C$19.75, representing at press time a one-year projected return of 35 per cent.