WELL Health Technologies Corp T.WELL

RBC Raises Target

[retiredcf]

By 21% and their upside scenario target is also raised to $11.00. GLTA

January 7, 2025

Outperform

TSX: WELL; CAD 6.95

Price Target CAD 8.50 ↑ 7.00

WELL Health Technologies Corp.

WELL remains a preferred stock pick in 2025;

reiterating Outperform; raising PT to $8.50

Our view: WELL remains one of our preferred stock picks into 2025. After strong performance of WELL shares in 2024 (+78% vs. +22%/+19% total returns of TSX60/TSX Small Cap), we see room for further upside in the shares. We believe the company has built a compelling moat in consolidating and transforming primary care and diagnostic clinics in Canada, where other groups have faced significant challenges. We transition our valuation to DCF valuation vs. an equal weighting of SOTP and DCF previously. As a result, our PT increases to $8.50 from $7.00.

Key points:

Strong moat in consolidating and transforming Canadian clinics that is difficult to replicate. We believe there is a significant long-term opportunity for value creation in transforming CDN primary and Dx care, as underscored by our strong forecasted ROIC and IRR metrics (our work suggests the MCI/Manitoba clinic acquisitions could generate ROIC of >30% in aggregate over time and an IRR of ~30%; see pp. 20–21 here). In our view, the recent entry of ELNA Medical Group (private), Canada’s second- largest clinic chain, into creditor protection (link) highlights the operational challenges and complexities in consolidating clinics in Canada, a segment where WELL has demonstrated continued success and built a significant competitive advantage of transforming the acquired loss-making clinics into profitable operations by leveraging its internal IT capabilities.

Progress in the 2023 cohort of clinic absorptions and acquisitions. During the Q3 earnings call, management highlighted the significant improvement in adj. EBITDA margins for the 2023 cohort of clinic absorptions and acquisitions. These clinics have transitioned from an adj. EBITDA margin of -1.6% at the time of acquisition to ~6.6% margins as of Q3, a substantial improvement of +820bps. Management anticipates further progress at these clinics over the next 1–2 years, targeting operating margins of greater than 10% for all clinics and ~20% for specialized care clinics.

Transition to a DCF valuation (100% weighting); PT to $8.50/sh. We transition to a DCF valuation for our price target calculation on WELL shares from an equal weighting of SOTP and DCF valuation, as the company streamlines its business model to transform and consolidate primary care and Dx clinics in Canada. WELL has announced several steps in this direction, including: 1) a strategic review of Wisp and Circle Medical, with a potential sale on the horizon; and 2) a potential spinout of WELLSTAR (WELL’s SaaS & Tech business). Our DCF valuation for WELL results in an $8.50/sh PT. In our view, WELL could potentially acquire some distressed ELNA clinics at minimal cost, and if it can replicate its successful track record of transforming loss-making clinics, it could generate exceptionally high ROICs, thereby creating significant shareholder value. We note that our forecasts do not account for any unannounced acquisitions, which could provide potential upside to our estimates and valuation for WELL shares.

[retiredcf]

Looking forward to the day when we finally get rid of all the traders who leap in and out of the stock every other day trying to make a few bucks. It may never happen but it would be nice. GLTA

[Noshortsallowed]

Especially when they all seem to be amateurs who think chat forums affect linvesotr sentiment.

[WINDGOD46]

It is the parasites of the market that live off the fat of the market, shorts daytrades, penny chasers and the whole crime syndicate that trash markets and put out of business start up companies for a few bucks. But that is the so called free market and the system allows this to happen. The best thing to do is get out of the market and let the crooks slug it out among themselves.

[sicnarf2]

Nobody is standing in your way !

[SunsetGrill]

Sooo Sicnarf - you are down now right with the latest two day drop, based on your post two days ago or so???? Somehow I'm sure you manouvered around this drop to make 30% like all the other post trade and a day later market prognostigators do; and always boasting about making a profit and never EVER  seem to lose on a trade. Please insert your complete B.S. answer here____________________

[sicnarf2]

Yes, I'm under water a bit here ,but when you have as many as I have in my portfolio you always have some up and some down . ESI up a lot today ,HWX ,VRN and HCU ,down on HBM and CS .,haven't even looked at the wife's portfolio yet ,hers mostly dividend payers ..