Fair Value of SNFs to Reliq Let's look at the potential value add for SNFs alone. According to data unearthed by mingzhu, there are 15,183 SNFs in the US. Reliq signed contracts since October covering about 214 of them, for about a 1.41% market share in just around 5 months. Assuming they get only 10% of this market (which to me seems very low), assuming they get 70% adherence (because patients get trained before they leave the facilities), assuming 30% of those patients are converted to long term monitoring contracts (the company says it's way higher than that - 80% - so far) and assuming no collections problems (because SNF are more professional organizations), here's what I get.
Yearly Transitional Revenue: (10% of 15,183 SNFs) x (70% adherence for 100 patients per SNF added each month) x US$65 x 1.35 forex x 12 months = CAD$112M
Yearly Monitoring ARR: 106,281 new adherent patients each month x 30% conversion rate x say US$60/mth x 1.35 forex x 12 months = CAD$31M for each new month's worth of patient discharges. Multiply that by 12 (because there are 12 month's worth of discharges each year) to get the full annualized amount, so CAD$31M x 12 = $CAD372M.
Based on company provided info, net (i.e., profit) margin should be about 45% EBITDA margin (less a smidge for depreciation/amortization) x 73.5% tax rate, or about 33%. Let's be conservative and use 25%, which yields a net margin of (CAD$112M + CAD$372M) x 25% = CAD$121M
Earnings per share (EPS) would therefore be about CAD$121M / say 225M shares (assuming more options and little buy-back) = $0.54.
So, for a 10% market share, the company's fair value might increase by say $0.54 x a 20-30x price/earnings multiple = CAD$10.80 to CAD$16.20.
If you don't like reasonable projections and want to stick just with announced contracts, the value add so far would be 1.41%/10% x the values in the preceding paragraph = CAD$1.52 to CAD$2.28.
So, even if the company lags in the development of its non-SNF business, enters no new niches and gets nothing from its Cognizant partnership, it's still cheap based only upon the SNF niche.
[All done without the use of revenue multiples.]
That's why I'm so pleased to see progress in the SNF space.