This analyst loves Extendicare

Extendicare (Extendicare Stock Quote, Chart, News, Analysts, Financials TSX:EXE) is expanding its home-healthcare platform with the acquisition of peer operator CBI Health, a move Leede Financial Group analyst Douglas Loe says fits directly into the company’s strategy to concentrate on long-term care and home-care services.

In a Nov. 21 update, he raised his target to $22.75 from $16.50 and reiterated a “Buy” rating, citing the transaction’s scale and the improved growth profile it brings to the Markham-based elder-care provider.

Extendicare agreed to acquire CBI for $570-million in cash, valuing the private home-care provider at 9.2 times trailing 12-month EBITDA, or 8.2 times if the company achieves up to $7.4-million in cost synergies.

Loe called the valuation “aggressive but justifiable,” noting Extendicare itself trades above 13 times trailing EBITDA. He argued the deal deepens Extendicare’s focus on a segment that is increasingly in demand as jurisdictions such as Ontario and Alberta push more care out of hospitals and into community settings. Extendicare partially financed the purchase with new equity.

CBI, previously owned by OMERS, generated $477.9-million in revenue and $61.9-million in EBITDA last year, with a 13% margin closely aligned with Extendicare’s home-care business. Extendicare’s own segment posted FQ3/25 revenue of $186.8-million and operating income of $25.4-million, a 13.6% margin including its first full quarter of contribution from the Closing the Gap acquisition.

On a run-rate basis, Loe said the two platforms are “within shouting distance” of each other, making the deal “highly transformative for Extendicare’s national home-health footprint.”

Loe expects acquisitive growth to drive a meaningful step-up in Extendicare’s home-care revenue, adding roughly $565-million in fiscal 2026 and rising to more than $580-million in 2027. He said the company should be able to extract real cost efficiencies, given the geographic overlap between the two firms and Extendicare’s established logistics expertise in a service-intensive business.

“We believe the CBI transaction can be about as bolt-on as a deal of this scale can be,” he said.

Extendicare is also investing in long-term care redevelopment, including six Ontario facilities under construction with Axium at a cumulative cost of $565-million. Those projects are slated to be operational by the first half of 2027, replacing 1,097 older C-suite beds with 1,408 private, higher-reimbursing suites. Additional redevelopment in Sudbury could begin later in fiscal 2025 and into 2026.

Using fiscal 2027 as his valuation reference year, Loe projects adjusted EBITDA of $254.7-million and AFFO of $1.96 per share. Applying an 11× multiple to both metrics supports his new $22.75 target, which implies a one-year return of 16.6% including the 2.5% dividend. He said the payout ratio has strengthened to 35.2% in the latest quarter, reinforcing what he views as a sustainable dividend policy.

Loe expects Extendicare to generate $176.1-million in Adjusted EBITDA on $1.72-billion of consolidated revenue in fiscal 2025, rising to $241.1-million on $2.35-billion in revenue in fiscal 2026.

-30-