VitalHub could have even more upside, Beacon says

The stock has been on fire, but Beacon Securities analyst Gabriel Leung says there could be even more money to be made on VitalHub (VitalHub Stock Quote, Chart, News, Analysts, Financials TSX:VHI).

On February 20, VHI announced that it had expanded its digital healthcare into the Middle East via a partnership with Abu Dhabi Health Data Services.

“This partnership underscores our dedication to advancing health care technology in the Middle East, empowering organizations with cutting-edge solutions for improved outcomes and efficiency, CEO Dan Matlow said. “With ADHDS’s support, we, at Vitalhub U.K., are well positioned to deliver enhanced value and innovation to the Middle East health care landscape. We anticipate transformative outcomes as our collaboration unfolds, reshaping the trajectory of healthcare technology in the region.”

Leung says this development could be a catalyst.

“We believe that the Middle East is a region that VitalHub has been eager to expand into (currently represents negligible revenues) and we view this partnership as a relatively safe and cost-effective way for them to do so (i.e. as opposed to an acquisition),” he argued. “The stock itself has performed well YTD (up 43%) putting its valuation at 14.7x CY24e EV/EBITDA versus the group at 15x. While the stock has caught up to the peer group, we believe there could be further upside as the company deploys its large war chest of cash for acquisitions (i.e. ~$30M in cash, $33M unused credit facilities, and strong FCF generation).”

In a research update to clients February 20, Leung maintained his “Buy” rating but raised his price target on VHI from $6.00 to $7.00, implying a return of 20 per cent at the time of publication.

The analyst thinks VHI will post Adjusted EBITDA of $16.3-million on revenue of $59.8-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $19.0-million on a topline of $66.6-million the following year.