Viemed Healthcare Inc (TSX: VMD), provides equipment and home therapy to service patients with various respiratory diseases. The group 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 conditions.

Key highlights 

• Revenue guidance for Q3 2021:The management is confident that its core business will generate net revenues of USD26.8 - USD27.8 million, with extra revenues of USD0.5 – USD0.8 million from sales and support connected to the COVID-19 pandemic. As a result, overall sales for Q3 2021 are expected to range between USD27.3 to USD28.6 million.

• Increase in ventilator patient count: The Company grew its ventilator patient count by 5% to 8,103, over 7,733 ventilator patient count on March 31, 2021. An increase in ventilator patient count is a healthy sign from the company’s prospectus as it derives most of its revenue through the rental of non-invasive and invasive ventilators which represented 77.3% and 81.9% of the traditional revenue in Q2 2021.

Source: Company

• Healthy balance sheet: In Q2 2021, the Company had a cash surplus of USD 31.2 million and a total working capital balance of USD 28.7 million, compared to USD 24.2 million as on December 31, 2020. In addition, the company reduced its total long-term debt from USD 6.6 million as on December 31, 2020, to USD 5.7 million on June 30, 2021.

• Industry Beating Margins: The resilient business of the company assisted in outperforming the industry median on many fronts of its operating margin profile, portraying the efficacy of the company. The matrix below gives a glimpse of this.
  

Financial overview of Q2 2021 (Expressed in thousands of U.S.D)

Source: Company

• In Q2 2021, the company posted lower revenue at USD 27.3 million compared to USD 42.8 million in the previous corresponding period. The revenue reduction was largely due to poor performance in the COVID-19 response sales and services sector, which saw revenue drop of 94.2% to USD 1.1 million from USD 19.7 million in pcp.
• Gross profit stood at USD 17.6 million compared to USD 25.9 million in the previous corresponding period.
• In Q2 20201, an operating income stood at USD 2.6 million against USD 12.8 million in pcp. The decrease in operating income was primarily due to lower gross profit and lower other income.
• Net income registered by the Company in the reported period, totalled USD 1.5 million, compared to USD 19.4 million in pcp, the decline in net income was primarily due to lower revenue and above stated reasons.

Risks associated with investment

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

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

 The company grew its ventilator patient count by 5% to 8,103 allowing it to increase its core market, which is a key positive. As the group is continuously expanding geographically and further penetrating existing territories, it expects growth in its active ventilator patient base and ventilator rental revenue. Furthermore, the management anticipates net sales of USD27.3 - USD28.6 million in Q3 2021, which is a significant factor. Therefore, based on the above rationale and valuation, we recommend a "Speculative Buy" rating at the closing price of CAD 7.17 as on October 14, 2021.  

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on October 14, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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