Echelon Capital Markets analyst Rob Goff likes the execution to plan from Skylight Health Group (Skylight Health Group Stock Quote, Chart, News, Analysts, Financials TSXV:SHG), maintaining a “Speculative Buy” rating with his target price remaining at $8.00/share in an update to clients on September 16. Headquartered in Mississauga, Skylight Health Group is a healthcare services and technology company with a network of multidisciplinary medical clinics and virtual telehealth services for over 120,000 patients in Canada and the United States. Goff’s updated analysis comes after Skylight announced it had acquired a controlling interest in Aspire Health Concepts, a Pennsylvania-based primary care group with locations in the Keystone State. “We see the acquisition of Aspire adding to Skylight’s scale while enhancing the company’s leverage in adopting the VBC model facilitated by its recent purchase of Accountable Care Organization (“ACO”) licenses,” Goff wrote. “We note that as an ACO, the Company’s owned or affiliated clinics are considered as one entity when dealing with payers such as Humanacare versus negotiating on a clinic-by-clinic basis.” The acquisition gives Skylight a 70 per cent stake in Aspire, while the remaining 30 per cent will be retained by the two founding physicians subject to SLHG’s call option with a five-year maturity from the closing date, and the acquisition, the details on which have not yet been provided, is expected to contribute incremental annualized revenue of over US$2.5M ($3.2M) with EBITDA of eight per cent. The acquisition brings an initial base in Pennsylvania for further acquisitions while the two clinics add 2,000 Medicare patients to the Company’s value-based care pool as it looks to phase in its VBC introduction in 2022. “This is a very exciting acquisition for us. Skylight enters a new market with a clinic group that is well established and well regarded, at a time when growth in the primary care sector is strong and patients are seeking a higher level of care,” said Prad Sekar, CEO of Skylight in the company’s September 15 press release. “As we continue to integrate our growing number of clinics across the US, the Aspire acquisition is certainly an excellent fit to the Skylight family.” The acquisition comes on the heels of Skylight making a change at the executive level, bringing in Mohammad Bataineh, a veteran of over 25 years of experience working in primary care, healthcare M&A, integrations, legal and operations, as the company’s new President. “I look forward to continuing strong execution within my new role at Skylight Health, and now as part of the executive leadership team,” Bataineh said. “The entrepreneurial nature of this company, its team, and leadership style is what I believe will truly differentiate us from other players in this space. We are moving at such a rapid pace as we look to accelerate and scale our model through VBC conversion, the acquisition of more practices, and de novo sites. I will draw on my experience to drive this organization forward and bring increased value for all our stakeholders.” The announcement prompted Goff to make a few changes to his financial projections, raising his 2021 revenue estimate to $41.4 million from $40.6 million for a potential year-over-year increase of 216 per cent, with another projected increase to $56.7 million in play for 2022, which would be a 37 per cent potential year-over-year increase. Goff also slightly revised his EBITDA projection for 2021 to a $5.1 million loss instead of the original $5.2 million loss projection, and he expects 2022 to be when Skylight posts a positive EBITDA at $100,000. He has also adjusted his EPS projection, lowering his estimate to a $0.40/share loss for 2021 instead of a $0.08/share loss. Goff also holds an optimistic view of the company from a valuation perspective, as he projects the EV/Revenue multiple will drop to 3.7x in 2021 and 2.7x in 2022 compared to the targets of 7.6x in 2021 and 3.5x in 2022, and the peers project at 11.1x for 2021 and a spike to 73.7x for 2022. Meanwhile, the EV/Gross Profit multiple follows a similar path, with Goff projecting a drop to 5.7x in 2021 before falling to a projected 4.1x in 2022 compared to the targets of 11.8x in 2021 and 5.4x in 2022, while the peers project at 11.1x in 2021 and 6.8x in 2022. The EV/EBITDA multiple projections come into play in 2022, with peers projecting at 73.7x. With a focus on patient roster building primary care, Goff believes Skylight will accelerate the adoption of its VBC model. “Our forecasts continue to call for additional upfront investments reflected in Skylight’s EBITDA ahead of its VBC introduction while reported revenues lag booked revenues,” Goff said. “The VBC model carries the upfront deferral of cost savings-related payments deferred until six months into the calendar year following the patient’s visitation.” At press time, Goff's $8.00 target represented a projected one-year return of 105.1 per cent. Skylight’s stock price is down 38.6 per cent for the year to date, reaching a high point of $9.25/share on February 18.