Get a 6x return with Salona Global, says Leede Jones Gable

Leede Jones Gable analyst Greg McLeish is staying bullish on Salona Global Medical Device Corp (Salona Medical Device Corp Stock Quote, Charts, News, Analysts, Financials TSXV:SGMD) after reviewing the company’s latest quarterly results in a Wednesday report to clients. 

The stock has moved downwards over the past 12 months, going from about $0.80 last May to now in the $0.25-$0.30 range, but McLeish reiterated a “Buy” rating in his report and a target price of $1.50 per share, good for a one-year return at press time of 500 per cent.

San Diego-headquartered Salona, an acquisition-oriented medical device company targeting the aging population in the US and internationally, announced its first quarter 2023 financials on Tuesday. The Q1 featured revenue of $10.7 million, up 23 per cent year-over-year and up one per cent sequentially, and gross profit up 27 per cent to $4.1 million. Adjusted EBITDA was $642,269 compared to $801,986 a year earlier.

With the quarterly statement, Salona also announced the acquisition of Arrowhead, a recovery science medical device sales and distribution business, which is expected to add $4.0 million in revenue to Salona. 

The company also provided an update on recent acquisition Mio-Guard, saying, “Mio-Guard has generated strong revenues and has grown its sales by more than 25 per cent in calendar year 2022 compared to calendar year 2021.The Company intends to integrate Arrowhead with the Mio-Guard business unit in an effort to leverage the portions of the businesses that are differentiating and expand the portions that are complimentary.”

On the quarter, McLeish said the $10.7 million topline compared to his forecast at $10.1 million, while the adjusted EBITDA at $642K compared to his call at $158K. The net loss was $0.03 per share compared to McLeish’s estimate at negative $0.01.

On Salona’s recent M&A, McLeish said the Arrowhead acquisition, “builds upon Salona Global’s strategy to create a fully integrated global medical device company as well as adding a known global brand of devices to the company.”

“Salona plans a cross-selling strategy post-acquisition with the aim to increase revenues by offering its Mio-Guard athletic training market products to the large existing Biodex customer list while offering Biodex physical medicine products into its current sales channels,” he wrote.

For a forecast on Salona, McLeish has estimated revenue going from $33.6 million in 2022 to $66.2 million in 2023 and to $76.7 million in 2024. On EBITDA, the analyst has forecasted $4.0 million in 2023 and $6.7 million in 2024.