Debt is not an Issue, Less Than 4xDebt/EBITDA on 2017 Number Wow, that guy who tries to argue sell due to debt load is quite off base on this one. Management finally has gotten this ship righted with the sale of the non-core assets and the large investment to help develop their supply chain. This is another great turnaround story for 2017 – 2018 as its business accelerates after finally addressing its B/S issues.
Last year in Q4 their net debt was 260M and had a net debt/EBITDA ratio of over 30x. Compare that to Q4 2016 net debt of 90M and a net debt/EBITDA ratio closer to 5x and if you look out to 2017 you are going to have a Net Debt/EBITDA closer to 4x which is quite manageable and gives them room to continue to hunt out more accretive deals like the one announced at the end of 2016.
CHH is on a EBITDA run rate of 20M even at today’s business which means it is only trading at 6x 2017 EBITDA. If you put a 12x EBITDA number on it business, you get 1.42/Share or 12x EV/EBITDA multiple on it gets you 1.23/share. Could easily be a double in 2017.
Given the stability of the business and no exposure to drug pricing risk this is my favourite healthcare name for 2017. The underlying business is too sticky and valuable to the underpinning of the healthcare supply chain to not get taken out at some point.