Quipt Home Medical Corp T.QIPT

Alternate Symbol(s): QIPT

Healthcare

Quipt Home Medical Corp. is a home medical equipment provider. The Company specializes in improving the home management of chronic illness through the application of telehealth systems and automated distribution. It provides in-home monitoring and disease management services, including end-to-end respiratory solutions for patients in the United States. It offers nebulizers, oxygen concentrators, continuous positive airway pressure (CPAP) and Bilevel Positive Airway Pressure (BiPAP) units; traditional and non-traditional medical respiratory equipment and services, and non-invasive ventilation equipment, supplies, and services. The Company's product offerings include the management of several chronic disease states focusing on patients with heart or pulmonary disease, sleep disorders, reduced mobility, and other chronic health conditions. Its products and services consist of sleep apnea and pap treatment, home ventilation, daily and ambulatory aides, and respiratory equipment rental.

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Quipt Home Medical Corp > Raymond James Initiates Coverage

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Post by SBAASTOCKS11on Dec 15, 2020 9:08am

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Post# 32107492

Raymond James Initiates Coverage

RATING	Outperform 2
TARGET	C$2.00
SUITABILITY	High Risk/ Growth
MARKET CAP (MLN)	C$169
ESTIMATES	2020E Revenue (mln) C$100
	2021E Revenue (mln) C$131

Protech Home Medical Corp. (PTQ-TSXV) is a fast-growing provider of clinical respiratory equipment for a network of over 17,000 referring physicians and 110,000 patients across 10 U.S. states, overseeing the delivery of nearly 250,000 pieces of durable medical equipment (DME) annually. PTQ uses efficient delivery technologies and scale economics to innovate the way DME is delivered to a growing, aging U.S. population.
In the $50 bln (growing at 5% CAGR), highly fragmented U.S. DME market (>6,000 operators), PTQ focuses on securing strategic locations based on geography, new patient volume, and service mix, and on consolidating distribution channels to realize operating efficiencies. These drive PTQ’s capacity to generate positive cash flow and operating profits, and PTQ’s continuous, technology-empowered improvement of operations serves to ensure the maintenance of healthy gross margins in the midst of rapid growth.

Competitive Bidding Ends for DME: Big Growth Opportunity as Tectonic Plates Shift

Oct. 27, 2020: A watershed announcement from Medicare—which provides ~40% of PTQ's revenue—indicated that it would cancel the restrictive, reimbursement rate-crushing competitive bidding program in most DME categories. What we draw from this: After a steep downward trend for 10 years, DME reimbursement rates just bottomed. This landmark shift in CMS policy, which happened just months ago, represents long-awaited stability reimbursement rates, and opens the door for material growth opportunities among well-capitalized operators such as PTQ.

Valuation

We use comparable company analysis to drive our valuation of PTQ. According to our revenue estimates, PTQ trades at just 1.2x 2021 EV/Revenue, versus peers at an average 1.7x: a 27% discount. More impressive, PTQ trades at 6.0x 2021 EV/EBITDA, versus peers at 12.7x: a 53% discount. A steadied pace of accretive acquisitions—which we do anticipate in light of recent CMS policy shifts—would motivate us to reduce our conservatism in valuing PTQ. Today, we use PTQ's 2021 EV/Revenue multiple discount to peers to drive our valuation. So, we derive a $2.12/sh. target price, which we round to $2.00. At the time of publication, this represented a ~33% premium to the current share price, so we ascribe an Outperform rating.