RE:Raymond James Initiate CoverageIn this morning's G&M, this provides a few more details. GLTA
Raymond James analyst Michael Freeman thinks Well Health Technologies Corp. has “become the center of gravity in Canada’s primary healthcare and digital health ecosystem, and is a rapidly ascendant power in U.S. hybrid care, growing by way of disciplined, accretive M&A.”
In a research report titled Tech-enabling Doctors is the Right Idea, he initiated coverage of Vancouver-based company, which meshes digital health technology and in-person clinics, with an “outperform” recommendation.
“WELL leverages its large, growing footprint of physical clinics, combined with its increasingly broad and interconnected suite of digital tools to empower healthcare practitioners and patients, looking to improve health outcomes and yield efficiencies in overstressed healthcare markets often fraught with long wait-times and outdated tech,” said Mr. Freeman. “WELL’s two broad operating categories—omni-channel patient services (‘bricks and clicks’) and virtual services (‘clicks only’)—are core to the company’s hybrid approach to healthcare, enabling WELL to leverage cross-platform operational and technological synergies, and situating the company nicely to take advantage of structural and capital markets-oriented tailwinds (see Tailwinds section).”
In justifying his bullish stance, the analyst pointed to three key “stories” driving Well’s rapid growth.
- “The Canadian story” as the country’s largest private outpatient clinic network with its digital tools used by approximately one quarter of practitioners. He noted: “Tailwinds: i) massive federal funding to improve capacity and modernize systems; ii) provincial governments tapping private sector to provide publicly-funded services; iii) profitable clinic networks on market for 3-4 times EBITDA today; iv) WELL’s outpatient clinic market share is only 1 per cent, with significant room to grow, and; v) WELL is one of Canada’s largest holders of health data (others: Telus, Loblaw), and is the most likely group, in our view, to quickly adopt generative AI to high-grade its tech offerings by building on its hard-to-beat tech stack.”
- “The U.S. story” with 60 per cent of its 2022 revenue coming from south of the border, representing a rise of 100 per cent year-over-year. He pointed to “high-profile” M&A activity in the country and calling it “a not-yet Nasdaq-listed rising star in the U.S. (and, importantly, a profitable one).”
- “The revenue story,” noting: “WELL exited FY22 with run-rate Rev. of $626-million and 17-per-cent adj. EBITDA margins, guides to FY23 Rev. of $665-685-million, and indicates that it sees a path to $1-billion in Rev. within 3 years. Given WELL’s strong management team, track record of driving high organic growth and prudent M&A, and pronounced sector tailwinds, we don’t need to squint much to see this too.”
Mr. Freeman set a target of $8.50 per share. The current average is $7.96.