Andlauer Healthcare Group Inc. (TSX: AND) is a Canada-based supply chain management company that provides healthcare supply chain services. The group operates into two major segments: Healthcare Logistics and Specialized Transportation.

Key highlights

• Higher EBITDA & Net Income for FY21: The group reported an increase of 51%% in its EBITDA, which stood at CAD 119.25 million in FY21 as compared to the EBITDA of CAD 78.9 million in the pcp. The Net income grew by 138.5% to CAD 89.95 million for the reported period vs CAD 37.7 million in the FY20. Despite the strong headwinds related to the supply chain issues, the company posted stellar numbers for FY21, which is a key positive.

• Improved revenue across all the segments: For FY21 the revenue from the Specialized transportation segment surged to CAD 304.78 million from CAD 197.98 million in the pcp. The biggest increase was from the Ground transportation (a part of Specialized Transportation segment) revenue that jumped to CAD 261.87 million in FY21 from CAD 177.17 million in FY20. The total revenue from the Healthcare Logistics segment increased to CAD 135.32 million in F21 vs CAD 116.35 million in the pcp.

• Dividend declaration: on March 15, 2022, the group announced the dividend of CAD 0.06 per subordinate voting share for the period between January 1, 2022, to March 31, 2022, payable on April 15, 2022.
  

• Industry beating margins: The company demonstrated higher profitability metrics in Q4FY21 by reporting an EBITDA margin of 26.40% as compared to the industry median of 13.4%. The Operating margin of the group for the reported period stood at 16.1% vs the industry median of 8.2%. To add more, the Net margin of the company for Q4FY21 was reported at 39.9% as compared to the industry median of 3.4%.
  

        Source: Refinitiv, Analysis by Kalkine Group

Risks associated with investment

The group is vulnerable to the various supply chain disruptions and labor shortage issues because of the pandemic and ongoing geopolitical issues. The cost of transportation, rising wages, employee retention costs, credit risks, etc are the few key operational challenges to which the company is exposed.  

 Financial overview of FY2021 (Expressed in thousands of CAD)

Source: Company Filing 

• The company reported an increase in total revenues to CAD 133.02 million in Q4FY21 vs CAD 86.63 million in Q4FY20. For FY21, the total revenue surged to CAD 440.11 million vs CAD 314.34 million in the pcp. It's worth mentioning that the biggest jump was reported from the Specialized transportation segment recording an increase of 75% in Q4FY21 when compared with the Q4FY20 numbers.

• The total operating expenses increased to CAD 111.57 million in the Q4FY21 vs CAD 72.35 million in the pcp, on account of higher transportation and services costs. For FY21 the operating expenses rose to CAD 366.41 million vs CAD 263.40 in the FY20.

• For Q4FY21 the company reported a net income of CAD 53.10 million vs CAD 13.86 million in Q4FY20. For FY21, the net income of the group was CAD 89.95 million vs CAD 37.71 million in the FY20.
  

 Valuation Methodology (Illustrative): EV/ Sales based Multiple

Analysis by Kalkine Group 

Stock recommendation 

The stock delivered a positive return of 7.70% in past one month and a staggering return of 41.28% in the past nine months. The company presented strong FY21 revenue numbers of CAD 440.11 million with a growth of 40% as compared to the FY20 revenues, along with a significant increase of more than 100% in its Net income for FY21. Further, the group successfully acquired Logistics Support Unit Inc (‘LSU”) for almost CAD 30 million, which will help the company to expand strategically.

On the valuation front, the stock is measured on the Enterprise Value to Sales based multiple, and currently trading at 1.9x as compared to the industry median (Healthcare) of 4.1x, this implies the stock is currently undervalued and there is much space left for the stock to match the industry valuations. We have considered Sienna Senior Living Inc., Medical Facilities Corp., etc as the peer group for the comparison.

Therefore, based on the above rationale and valuation, we recommend a “Hold” rating at the closing price of CAD 50.21 on March 21, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on March 21, 2022). Source: REFINITIV, Analysis by Kalkine Group

Disclaimer

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