This new development makes WELL Health worth more, analyst says

In an April 8 note, Stifel analyst Justin Keywood maintained his “Buy” rating and C$8.00 target on WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News, Analysts, Financials TSX:WELL), saying a stronger-than-expected Medicare Advantage rate update improves the underlying value of CRH Medical, WELL’s largest U.S. asset.

Keywood said U.S. health insurers rallied after Medicare Advantage 2027 payment rates came in at 2.5%, ahead of the 0.9% expected, and argued the read-through is positive for CRH’s reimbursement outlook. About one-quarter of CRH’s business is tied directly to Medicare reimbursement, but he said the rate backdrop also tends to influence commercial payors.

“The reimbursement outlook supports increasing SOTP value,” he said.

That matters because CRH is a major free cash flow contributor inside WELL and could also become more valuable in a divestiture scenario. Keywood estimates CRH is worth C$400-million to C$600-million, including anesthesiology, recruitment and medtech assets, with the O’Regan ligator device business alone potentially worth C$40-million to C$65-million.

Keywood said average reimbursement for colonoscopy and upper GI endoscopy anesthesia has been mostly flat since 2020, but he now sees a more constructive growth path. In his view, that should help CRH’s profitability and could also support discussions around a potential sale, which would simplify WELL and sharpen its profile as a pure-play clinic consolidator.

He said his sum-of-the-parts analysis values the anesthesiology and recruitment business at roughly 8x shareholder EBITDA, implying about C$450-million of value, while the broader C$400-million to C$600-million range reflects a possible downside multiple of 7x and an upside of 11x, depending on urgency and buyer interest.

Keywood added that CRH appears to be in a better operating position after working through earlier headwinds including the No Surprises Act and the Change Healthcare cyberattack. He said the improved reimbursement backdrop only strengthens the case that the market is undervaluing WELL’s U.S. assets.

Nick Waddell owns shares of WELL Health and the company is an annual sponosr of Cantech Letter

-30-