RE:Beacon Unchanged 12.25 Canadian:Reminder.
LongTerm3 wrote:
Viemed Healthcare (VMD – T) )Q4 Results Breath Life into Stock •
Viemed reported better than expected Q4/FY21 results that have resuscitated its share price with the stock up 20%+ today yet only returns the price to where it was trading 4 weeks ago. We note that this comes off an incredibly low base as the shares hit a 2-year low yesterday and the stock still trades just 4.5x our FY22 EBITDA forecast, well below both its historical average as well as the historical average of its peer group.
• The company reported $29 million of “core” revenue and $32 million including COVID related revenue. Its core revenue was +11% y/y and +4.3% q/q. Management noted that Q4 grow accelerated (17% annualized) as COVID restrictions mitigated and referral sources opened-up.
• Viemed continues to do an excellent job of diversifying its revenue stream as vents represented 75.6% of core revenues, down from 80% in Q1. Annualized revenue per active vent patient remained consistent at ~$10,500 while other product revenue per patient increased to $3,400, up from $2,600 in Q1. This helps drive total annualized revenue per patient to a new high of $14,000, up 8% versus Q1.
• Reported Q4 EBITDA was $9.5 million, albeit we our model does not include CARES Act Fund received ($1.5 million in Q4). As such, our analysis indicates EBITDA of ~$8 million and ~$7.5 million (~25% margin) if one looks solely at its core revenue, which is a record for the company.
• Balance sheet remains in great shape with $28.4 million in cash, some of which it will use to fund its newly announced NCIB program under which it is authorized to buy up to 5% of the total shares outstanding (~1.95 million shares). If such a program were fully executed at current prices, it would cost ~$8.6 million or only 30% of its cash balance.
• We have essentially maintained our FY22 forecast of $126m/$31m, which is based on a 15% increase in vent patients and growth in non-vent revenue (ie. oxygen, sleep) to 25% of total revenue versus 23% in FY21. Such growth will continue to be organically driven as Viemed expands its sales force to include more geographic regions. We have also introduced our FY23 forecast of $141m/$36m. Note that Viemed fully funds its cap-ex program ($20m in FY21) through its cash flow, which leaves its current cash balance to fund the aforementioned share buy back and any potential penalty from the conclusion of the OIG investigation (maximum $9 million).
• We have tracked the healthcare service industry for several years and historically the group has traded in an EV/EBITDA range of 8x-12x. This was seemingly confirmed by Owens & Minor’s (OMI – US, NR) acquisition of Apria (APR – US, NR) at $37.50 or ~7.5x EBITDA – clearly at the lower-end of the range but reasonable given Apria minimal organic growth and that Blackstone has been selling stock since its March 2021 IPO (@ $21.00).
• Over the past several months, we have seen a remarkable valuation contraction across the sector such that VMD was trading at 3.5x prior to the release of its Q4 results. This is a sector that should experience strong organic growth, driven by an aging demographic and a benign regulatory environment, which should give investors visibility on margins. Note that in a protracted inflationary market, VMD’s pricing will benefit from Medicare CPI adjustments (which is 5% this year). These trends are neither impacted by oil prices or the war in Ukraine. We believe the sector will return to its historical valuation ranges.
• We maintain our Buy recommendation and C$12.25 target price based on 10x our FY23 EBITDA forecast.