Viemed Healthcare Inc

Viemed Healthcare Inc (TSX: VMD) is a high-level service provider using best in class technology and equipment to increase the quality of life in the homes of patients with respiratory diseases. It provides equipment and home therapy to service patients with various respiratory diseases.

Key Highlights

• Revenue Guidance: For Q4 2020 the company expects to generate net revenues of approximately USD 26 million to USD 27 million from its core business, and additional revenues of about USD 5 million to USD 6 million from sales and support related to the COVID-19 pandemic. Hence the total revenues for Q4 2020, are estimated to be in a range of USD 31 million to USD 33 million.

• Attractive industry growth opportunity: At the age of 65, patients qualify for Medicare. Ten thousand people turn 65 daily for the next 19 years. Expenditures on Medicare are expected to grow at a 5.4% CAGR from USD54.9 billion to USD74.0 billion in 2023. This reflects the untapped opportunities that the company might think to cover up.

Source: Company

• Healthy balance sheet: The Company has the highest cash balance ever of USD 32.4 million at September 30, 2020, as compared to USD 13.4 million at December 31, 2019, and an overall working capital balance of USD 19.6 million against USD 1.9 million at December 31, 2019. Total long-term debt as of September 30, 2020, was USD 7.2 million.

Financial overview of Q3 2020

Source: Company

• Significant growth was registered in Q3 2020 by the Company's core operations. Net revenues from core business for the quarter stood at USD 24.9 million, an increase of 22% on a Y-o-Y basis. Total revenues for the current quarter were USD 33.4 million, which included approximately USD 8.6 million of product sales and services related to the ongoing COVID-19 pandemic.
• Net income registered by the Company in Q3 2020, totalled USD 2.8 million compared to USD 2.9 million in the previous corresponding period. 

Risk associated with the investment

The company is susceptible to a variety of risks including the uncertainty from the general business, market and economic conditions, impact of the covid-19 pandemic, financial conditions, the ability of the company to implement business strategies and pursue opportunities, etc.

All forecasted figures and peers have been taken from Thomson Reuters

Stock recommendation

The company witnessed significant growth in its core business, and it is maintaining the highest ever cash balance of USD 32.4 million, with a long term debt of only USD 7.2 million in its books, which reflects the solid financial health of the company. The company is well-positioned to report sustainable growth and profitability by leveraging its brand awareness, improved operational synergies, and expanding its footprints across the US market. Furthermore, the company has more than 95% untapped market, as only 40,000 beneficiaries have been catered among 1.25 million of potential candidates. Therefore, based on the above rationale and valuation, we have given a ‘Speculative Buy’ rating at the closing price of CAD 11.53 on 5 November 2020. We have considered Protech Home Medical Corp, Electromed Inc, etc. as the peer group for the comparison.

VMD daily technical chart. Source: Refinitiv (Thomson Reuters)

HEXO Corp

HEXO Corp (TSX: HEXO) is a consumer-packaged goods cannabis company which manufactures and distributes innovative products to serve the global cannabis market. The company serves the Canadian adult-use markets under its HEXO Cannabis, Up Cannabis and Original Stash brands, and the medical market under HEXO medical cannabis.

Recent Updates:

• The company informed that it had reached a settlement after pursuing legal action against a California business using the HEXO name and trademark. Earlier, Assi Project Management was accused of unfair competition and trademark infringement, arising from the unauthorized selling of CBD products and services under the name HEXOCBD.

FY20 Financial Highlights:

• HEXO announced its full-year results, wherein the company posted revenue of CAD 110.15 million, significantly higher than CAD 59.256 million reported in the same period of the previous financial year.
• Gross profit stood at CAD 26.953 million, higher than CAD 21.344 million in FY19, supported by higher revenue growth.
• Loss from operations significantly expanded in FY20 to CAD 476.55 million, against a loss of CAD 86.974 million, a year ago, due to significantly higher operating expenses.
• HEXO reported a higher net loss of CAD 446.489 million, as compared to CAD 69.608 million in FY19.

FY20 Income Statement Highlights (Source: Company Reports)

Risk: The company’s products are relatively new to the customers and yet to report a stable demand. Any changes in the customer preference would dampen the sales volume of the company and would hinder the top-line as well.

Stock Recommendation: The company reported a higher top-line growth but failed to retain its bottom-line due to a sharp rise in operating expenses. Total operating expenses stood at CAD 418.576 million, significantly higher than CAD 111.482 million in FY19. Due to an elevated cost, the company reported lower financial flexibility. Also, the stock of HEXO corrected ~60% so far this year, and currently trading at the lower band of its 52-weeks trading range of CAD 3.58 and CAD 0.50. The company reported increased in demand from its high-quality products in the recent past through a higher product demand for 2.0 products and its high-quality offering, which are key positives. New product offerings like Truss cannabis infused beverages has gathered improved traction as well, while the company has a significant market share across Quebec geography. However, its shares are still trading in a bearish price zone, with price closes below its crucial long-term as well as short-term support levels of 50-day, and 200-day SMAs. Therefore, based on the above rationale, we recommend a ‘Watch’ stance on the stock at the current market price of CAD 0.95 on November 05, 2020.

1-Year Price Chart (as on November 05, 2020, after the market close). Source: Refinitiv (Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.