Post by
donmayne on Jan 01, 2021 8:57am
2020 - My take
Fellow investors.
What a crazy year for a company that claimed at the beginning of the year that it had often mentioned a core business with an established track record growth rate.
In at the end of 2019, the closing price was $C8.13. It fell to $C3.36 (low) and then rose to $C16.19 (high) and then down again to $C9.95 close.
The growth in the core business was excusably paused with the first wave of Covid but management suprised everyone by taking advantage of the shortages in PPE and became a supplier of PPE and Vents. In doing so, they took the opportunity to replace their own equipment with newer models and sold off all their old equipment. Some of their own customers who were not using the equipment had that unused equipment sold off and those customers were removed from the total numbers. The way of doing business changed and the Respiratory Therapists moved to virtual visits. This triggered more opportunity in the long run but more interference with the growth.
The company had a blockbuster quarter of earnings from sales of vents and PPE. This caused the share price to jump above $C16. Management options were exercised en-masse. Hmmm what did they know?
After peaking above $16 in June and trading around $15 in July, it likely occured to management that it was a lost opportunity to have made a public offering to raise significant funds. This is the motivation behind the shelf offering because the company knew that there was going to be a second wave and more opportunities might arise for being an intermediary in the supply chain of PPE and vents.
When the company finally picked up the pieces of its core business in the fall, it recognized that its track record on growth was itself on life support. When the forward looking growth was announced it was less than what had been touted in the past. The PE ratio for the core business profits suffered. Understandably, the estimates were low which is reflective of management's conservative nature and they knew a second wave would likely negatively impact the normal business procedures.
Investors (including institutions) looking for a company with a core business and a long term track record cannot make Viemed fit their templates. Due to its decline in price, it became a natural one to dump from their portfolio and take a capital loss to offset capital gains in other holdings.
No doubt management is hoping for an increase in the share price so that it can capitalize on the shelf offering. My sense is that their target price to launch the public offering would again be in the $15+ range. If they were to do that, the timing for this might again be in the spring/early summer coinciding with Q1 or Q2 results.
VMD is still largely unknown to the US investor but the average volume on NASDAQ is increasing dramatically and it could easily become a darling. The external environment (pandemic, vaccines, politics, potential competitive bidding requirements) are just too unpredictable.
But there are many positives for the long-term investor. The management team is sharp, The company will undoubtedly survive the pandemic and any slowdown in the economy. The demand for at home care has never been higher. The opportunity for core business growth remains and management is capable of executing on this in a normal environment. It is unlikely that there will be new competitors on the market in this environment.
The year end results might have a surprise in terms of PPE sales. This may carry forward into Q1 as the pandemic continues. The growth in core business will eventually resume but probably much lower than the old track record.
I am currently holding my investment but still have my seat belt firmly fastened. GLTA
What is your take?
Comment by
besttobe on Jan 01, 2021 1:59pm
donmayne wrote " What is your take?" Investors should have sold above $13.00 and wait for the bottom. I see zero reason to hold this stock, at this point. GLTA
Comment by
lscfa on Jan 01, 2021 2:32pm
Mgmt did a lousy job of presenting financials. Q2 to Q3 ebitda went from $16.3 mil to $7.7 mil but Q2 ebitda included $5.0 mil of non-recurring items (COVID relief funds and gain on sale of equip.) which should have never been in an adjusted ebitda calc. Bozos shot themselves in the foot.
Comment by
lscfa on Jan 02, 2021 8:27pm
Vent patient growth stalled with COVID because co. could not enter hospitals, care facilities to market the home ventilation alternative. Other core activities like oxygen increased, however, and total revenues continued to grow. This does not include COVID related sales.
Comment by
JackLambert on Jan 02, 2021 10:09pm
You can't grow a home care NIV business when the therapists can't get into peoples home safely. Give them 60 days to get the vaccinations and then we are set. With hospitals bursting at the seams we give the sick a chance to be nursed in their own beds - at a saving of 20000$ per head per year. Slam dunk.
Comment by
jomen1789 on Jan 03, 2021 1:43am
Very interesting, thanks for the detailed post. This is the 1st time that I've seen someone explain the timing and motivation behind the Shelf Registration. Makes a lot of sense.