RE:$8 Price TargetA very nice analysis snootchy. Much appreciated!
Let me offer a different lens.
When the company was rolled-up into PHM, it was purchased for $CDN100 million. The deal was made in early May 2015 (closed June 2015) for a combination of PHM stocks, warrants, options and cash. The valuation at that time is revealing in that it approximates today's market capitalization.
Since 2015 many things have happened: 1) the VMD business has grown, 2) the focus is on COPD and not other distractions 3) management has concluded that organic growth (vs roll-up) is the only way to grow and 4) VMD has its own listing.
On the other hand, since 2015 the Medicare reimbursement rates have been cut. Nevertheless, VMD will soon demonstrate profitability at these reduced rates. One can speculate that VMD could never have had its initial success under the current reimbursement rates and its only reason for continued profitability are the economies of scale that it enjoys from its current size. The reduced rates will discourage new competitors in this space.
Future Medicare reimbursement rate cuts appear to be a continuing risk. However, as this home care model realizes significant savings from the traditional care models for COPD, the current rates may be red-circled to help foster growth and competition, particularly in rural areas. Competitive pricing currently does not exist simply because of a lack of competitors. Some were driven out of business due to the reimbursement rate cuts. It will be incumbent on VMD management to continue to tell their story from the perspective of cost savings to Medicare.
The complexity of filings to spin off VMD makes this company difficult to analyze. Snootchy has done a fabulous analysis. The key word in the title is "target." It is not worth $8 today. I agree with Snootchy that it will take several quarters. It may even take a few years.
Events to watch out for are:
1) quarterly filings showing sustained growth,
2) further distancing from the PHM fiasco
3) sustained price above $CDN3 where a small amount of margin is available,
4) a move to the TSX exchange from the TSX.V exchange (this is a relatively easy next step),
5) a sustained price above $CDN5 which is the threshold for larger funds to invest and
6) an application for a cross-listing on a US exchange, and
7) management spreading the story
Good luck to all.