Medical Facilities Corp T.DR

Wolf of Oakville financial review

[Possibleidiot01]

Medical Facilities Corp $DR.TO (3.5 / 5)

March 17, 2024|2023 Annual

Initial review for this quarter billion market cap on the TSX, per a request via the TSA discord.

Balance Sheet:

Mediocre but acceptable current ratio of 1.23 that consists of $24.1M in cash, $61.8M in A/R, $9M worth of inventory and about $8M in other current assets against nearly $83M in liabilities due within the next year. 60% of assets tied up in receivables is high. A common trend with companies in this sector is high accounts receivables reliant on governmental agencies to pay is typically high accounts receivables with poor aging statistics. MFC is no different here with over $12.5M in overdue receivables and sitting on a potential of $5.5M in write-offs.  Governmental contracts are great but not always the best for timely cash flow. MFC has $69M of debt across multiple facilities and notes payable that span full two pages in the financial statements. That does not include $12M in stimulus due this fiscal year. They have another $75M available to them under these various credit facilities, but it looks like they have paid a considerable amount down in the last year which we'll cover in the next section.

Cash Flow:

 

 

An impressive $72.7M in operational cash flow generated in 2023, over 27% better than they achieved in 2022. Since this one year of OCF fully covers their debt, I don't feel that their amount of debt is anything to raise one's eyebrow at. During the year they utilized that positive cash flow to purchase $16M in hard assets, lessened their net debt by $16M, paid $6M out in dividends, bought back $7.4M in stock and paid out $27.5M in distributions to non controlling interest given the significant amount of outside ownership in their reporting segments. Their overall cash position depleted by 31% during 2023.

Share Capital:

 

• Tight float of about 24.7M shares outstanding
• Thin, almost non existent insider ownership with about 15% institutional
• About 27% of total equity owned by non controlling interests, down from 31%
• About 1.3M options and other share units outstanding to insiders
• Their NCIB continues buying back stock almost daily on this relatively low liquidity stock. They could purchase up to 2.48M, or 10% of the outstanding float before Nov 30th.
• Pay about a 3% yielding dividend

 

Income Statement:

$445M in service revenue during 2023, almost a 5% gain over the $424k they achieved in 2022. Total operating expenses were pretty much flat to last year (down $1M) which allowed them to nearly double their Income from Operations to $67.1M, up from $34.9M. An excellence performance on only a 5% sales increase however about half of this profitability improvement is in a non comparable asset impairment of $16.5M they took in 2022. After total finance costs and a $2.5M one time gain, their Income before taxes actually tripled to $52.3M , up from $17.5M.

Overall:

Pretty solid results, particularly on the P&L although I'm gonna say due to one time items it's not as outstanding as the pure numbers may suggest. But, they are indeed solid on a rather pedestrian 5% revenue increase. They sold off or closed operations in five ambulatory surgery centers during the year, but I don't see much clarity in the comparable vs non comparable business performance as the disclosure of segmented information here is minimal at best. I don't love and tend to avoid plays like these when there is so much non controlling interest. Maybe it goes back to what my kindergarten teacher said about me close to fifty years ago - "Wolf doesn't like to share". Decent financials though with no red flags. With better top line performance it may have received a four star rating, as it is I'm gonna go with a 3.5.