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Bullboard - Stock Discussion Forum Extendicare Inc T.EXE

Alternate Symbol(s):  EXETF

Extendicare Inc is a long-term care facilities company. The business has five segments including Long-term care; Retirement living; Home health care; Other Canadian operations and Corporate segment. The long-term care segment represents the long-term care homes operated by the company. The Retirement Living segment operates retirement communities that provide services to private-pay residents. The Home Health Care segment provides nursing care, physical therapy, and assisting services to accommodate individuals living at home. The Other Canadian Operations segment provides consulting services to other care providers. The company generates a vast majority of its revenue from Canada.

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Extendicare Inc > Conference call highlights
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Conference call highlights

logicandinertia (49) | February 25, 2022 01:06 pm

Paramed - volumes will have a blip this quarter due to Omicron (workers got it and had to stay home) but unlike the first wave of Covid, they are seeing workers coming back after a few days and while Jan/Feb were impacted, trends in March look good.   Incremental margin (profit per incremental dollar of sales) will benefit from the ERP spend over past few years, in that you can onload more volume without additional general and administrative (back office) costs, thereby driving up margin.  Expecting strong volume growth from March to December 2022, and staffing helped by the college partnership and in=house training.   Sounded very +.

Other business - they don't talk about this much but when questioned, were very bullish about additional sources of profit going forward.  I came away thinking that annual run rate of $16million in NOI could be far exceeded in future periods. 

Will they spend the RETIREMENT proceeds on LTC acquisitions?  No, prefer to go organic route, which is longer in duration but fewer surprises and lots of greenfield opportunities.  Again brings back to the question of what you do with the excess capital in the business??? 

General wage inflation in LTC - suggested that government needs to (and will) factor in wage inflation in determining LTC subsidies looking ahead, given the dramatic demand need and not addressing wage inflation would be a headwind to meeting such demand.   Similar to what I had believed before, a big chunk of LTC inflation should be covered by government.   

In general, no change to original thesis, but think that NOI from both Paramed (Home Healthcare) and Other business could exceed what I initially thought. 

think stock is good value here.  EXE is relatively immune from business cycle, has inflation offsets (thru subsidy funding increases), underlevered, secular growth in underlying business and very low multiple as compared to peers.   For any larger US peer looking to expand into Canada, EXE has got to be interesting, as would it be to a private equity buyer (can lever up the business materiallly from its post retirement-sale level).  


RE:Conference call highlights

houbahop (164) | February 25, 2022 02:22 pm

All this excess liquidities after the sale of their retirement homes could go in refurbishing their old facilties. Thousands of beds need to be modernized!

Thank you for posting the CC highlights.

RE:RE:Conference call highlights

logicandinertia (49) | February 25, 2022 02:31 pm

Replacing older beds was already in motion prior to the sale of Retirement and will be partially funded by government initiatives.  see below.

"During Q4 2021, we commenced construction on our third LTC redevelopment project, a new 256-bed LTC home in the Ottawa area in Stittsville, Ontario. Together with our Sudbury and Kingston projects, the three homes under construction will replace a total of 624 Class C LTC beds with 704 new beds requiring a net investment of $178.9 million. The homes are being constructed exclusively with single patient rooms to maximize privacy and safety. We continue to advance our redevelopment program to replace our older Class C LTC beds in Ontario. With the proposals submitted pursuant to the October 2021 new call for applications by the Government of Ontario, we have a total of 21 redevelopment projects (3 under construction and 18 pending government approval). The proposed program would build more than 4,600 new LTC beds, which would replace all of our 3,285 existing Class C beds. Subsequent to year end, we were awarded new beds for three additional projects, bringing the total to 10 projects for which 1,952 beds have been awarded (including the three already under construction). We are actively engaged with our industry partners and the government to identify enhancements to the government’s capital development funding program to make all projects economically feasible. We continue to work through the Ontario Ministry of Long-Term Care (MLTC) and municipal approval processes and are targeting to begin construction on six more projects before the end of 2023."

RE:RE:RE:Conference call highlights

houbahop (164) | February 25, 2022 03:22 pm

Like it is said, "partially funded by government".

I am pretty sure the $110m in net cash that will be left after the sale,
will have good use in the years to come to finance the slice unfunded
by the government initiative.
This sale will make the transition virtually seamless and might avoid share dilution..

Very clever management.