Gabriel Leung of Beacon Securities is still a vociferous supporter of VitalHub (VitalHub Stock Quote, Chart, News, Analysts, Financials TSXV:VHI), maintaining a “Buy” rating and $5/share target price for a projected return of 71 per cent in an update to clients on Monday. Founded in 2015 and headquartered in Toronto, VitalHub develops technology solutions for health and human service providers in the hospital, regional health authority, mental health, long term care, home health and community and social service sectors in Canada, the United Kingdom and the United States. Leung’s latest analysis comes after VitalHub completed a pair of moves, namely, an acquisition and a round of new financing. As announced on Monday, VitalHub has bought Hicom Technology Limited, which is based in Woking, Surrey, UK and supports key international clients through a branch in the United Arab Emirates, at a cost of £8.7 million with £7.8 million pounds in cash along with over 475,000 common shares valued at C$3.02/share. There is also a potential future earnout of up to £1.55 million for Hicom, which generated revenue of £5.35 million (£4.2 million recurring), along with EBITDA of £1.05 million for an estimated margin of 20 per cent over the last 12 months ended March 31. “At first glance, we view this acquisition as being positive given Hicom’s revenue scale, profitability and valuation,” Leung said. “We also expect upside to come from cross-sell opportunities and potential cost synergise (particularly on R&D).” Founded in 2022, Hicom sells software that automates healthcare and business processes to over 200 customers, with approximately 85 per cent of its revenue coming from the United Kingdom. The company’s solutions support a wide-range of mission-critical healthcare-centered processes, including patient and clinical care, clinical research, workforce management, recruitment and selection, learning and development, compliance management and health and safety. Leung also notes that he expects M&A to be focused around adding scale, complementary technology and/or geographic expansion, though the company’s current situation of approximately $30 million in cash could lead to a major acquisition generating greater ARR, according to Leung. “With this acquisition, Hicom brings the expansion of VitalHub's existing customer base with the addition of 200 customers on an international basis and introduces six new solutions with potential for cross selling into our existing base,” said Dan Matlow, CEO of VitalHub in the company’s April 25 press release. “Hicom's market-leading diabetes management systems, Diamond and Twinkle, are currently used by greater than 100 customers worldwide. We believe these solutions can be offered to an international customer base. The long-established expertise of the HICOM team is truly amazing and we expect their impact will be extremely synergistic in short order." All told, Leung expects the company to have $17 million in cash still available following the Hicom acquisition, along with its recent acquisition of Beautiful Information, paired with cash on hand from the end of the previous quarter and the recently-secured $17.5 million in additional funding, which was completed Friday with the issuance of 5.6 million common shares at a value of $3.10/share. ‘Given that the company is already EBITDA positive, we expect VHI’s augmented war chest to be deployed for acquisitions,” Leung said. “Based on management’s strong M&A and integration track record, we believe any acquisition initiative should be accretive to shareholder value.” With both pieces of news in play, Leung has left his financial projections for VitalHub in place, as he expects an increase from the reported $24.7 million in revenue from 2021 to a projected $35.2 million in 2022 for a potential year-over-year increase of 42.5 per cent, followed by a jump to a projected $40.4 million in 2023 for a potential year-over-year increase of 14.8 per cent. From a valuation perspective, Leung forecasts the company’s EV/Net Revenue multiple will drop from the reported 4.5x in 2021 to a projected 3.2x in 2022, then to a projected 2.8x in 2023. Meanwhile, Leung continues to forecast solid adjusted EBITDA, with an increase from $4.7 million in 2021 to $7.7 million for 2022 in play, though he projects the margin to slightly widen from the reported 19 per cent to a projected 21.9 per cent. In terms of valuation, Leung projects the company’s EV/adjusted EBITDA multiple to drop from the reported 23.8x in 2021 to a projected 14.6x in 2022, then dipping again to a projected 11.8x in 2023. "We have updated our estimates to include Hicom. The net impact is that we are maintaining our Buy rating and $5.00 target price, which is based on 5x CY23e EV/Sales (which is in-line with the peer group)," Leung wrote. VitalHub’s stock price has dropped by about ten per cent since the start of 2022, hitting a yearly high of $3.45/share on March 29 after experiencing an early low of $2.91/share on January 24.