WELL Health Technologies Corp.
(WELL-T) C$7.97
Putting on a Clinical Performance; Initiating at BUY Event
We are initiating coverage of WELL Health with a BUY rating and $11.00 target price.
A leader in the Canadian primary healthcare sector. WELL is an omni-channel digital health company focused on empowering doctors and other healthcare professionals to provide the best and most advanced care possible in its 27 owned and operated primary healthcare clinics as well as in the ~2,200 clinics that are digital health customers.
COVID-19 is driving rapid technological adoption. Until last year, the pace of digital technology adoption in the primary-care space was relatively slow. However, the pandemic spurred rapid technological adoption, particularly for telehealth solutions. As a leading telehealth player in Canada with a growing presence in the U.S. and augmented by a broader technology-driven platform, we believe that the company is well-positioned to further strengthen its leadership position.
First-mover advantage has paid off; M&A a key catalyst. WELL has quickly become the fourth largest owner/operator of primary-care clinics, the third largest electronic medical records (EMR) vendor, and one of the leading telehealth players in Canada. Its stock surged +400% last year and is up over 40-fold since it announced its first acquisition in late-2017, as investors have rewarded it for what we see as its superior execution and successful M&A program that should continue, helped by its cashed-up balance sheet and a large M&A pipeline. Key acquisitions have typically been a catalyst for the stock.
Strong and aligned management; key ongoing endorsement by Li Ka-Shing.
Insiders own ~16% of the stock and have continued to add to their positions. In addition, Li Ka-Shing, both personally and through his venture-capital firm Horizons Ventures, was an early investor and has continued to participate in its financings (we estimate that he currently holds ~12-14% of shares outstanding).
TD Investment Conclusion
Our $11.00 target price is based on a sum-of-the-parts valuation (see Exhibit 7) and implies 9.4x our F2022 revenue forecast, which is in line with the average of its healthcare peers. Our target-price multiples are supported by peer-group valuations, its superior growth profile, cashed-up balance sheet, strong leadership team and its key investor sponsorship.