Stock’s detail

WELL Health Technologies Corp

Acquisition to Deliver Improved Performance: WELL Health Technologies Corp (TO: WELL) operates in modern clinical and digital assets for the primary healthcare sector. The company owns and operates 20 medical clinics, provides digital EMR software and services to 1,446 medical clinics across Canada. Recently, the business informed that it supports the regulatory actions for doctors and patients across Ontario and British Columbia amidst the escalating requirements for health services in both provinces due to COVID-19.

Key Business Highlights and Management Commentary:

• On 1^st October 2019, the business confirmed its ownership of 51% stake in SleepWorks, which provides services for sleep disorders patients. The group believe that this acquisition would help in delivering the improved performance in the near term. The business is focusing on several growth drivers like improving operational efficiency through its technology and shared services infrastructure to support the medical sector.

• Going forward, the company will be focusing on higher organic revenue for both its clinical and digital portfolios. It is also seeking for inorganic growth catalysts including several acquisition opportunities, which includes accretive health clinics, OSCAR-based EMR service providers and through other digital health related technologies.

• The Management believes that the current challenging scenario persisting within the Canadian healthcare segment can be lowered through the interference of technology. The business is relying on Digital tools such as virtual care, waiting room automation, and precision medicine higher clinic operational efficiency on account to improve the sector.

Financial Highlights for Q3FY19: During third quarter of FY19, the group reported a stellar revenue growth of 328% to CAD 8.19m against Q3FY18. Gross margin during the period under consideration nudged to 35.2% against 29.2% reported in the same period of the previous financial year, driven by a reduction in proportionate cost of clinical and digital services.  Net loss from continuing operations significantly expanded to CAD 4.8 million against CAD 0.91 million reported a year-ago, led by adoption of the new accounting standards. However, adjusted EBITDA loss during the quarter slightly shrunk to CAD 0.51 million against CAD 0.54 million reported in the previous quarter. 

Q3FY19 Financial Highlights (Source: Company Reports)

Stock Recommendation: The stock of WELL closed at CAD 1.39 with a market capitalization of CAD 160.64 million. The stock made a 52-week low and high of CAD 0.57 and CAD 2.04 and despite a sharp sell-off in the broader market, its shares were more tilted towards the 52-week high price level. On a YoY basis, its shares have delivered a price return of 148.21% and relatively outperformed its benchmark index by 215.82% in the same period. The business made nine acquisitions since the beginning in FY18 and reported a stellar revenue growth of 328% in Q3FY19, with significantly higher gross margin as well, driven by a reduction in proportionate cost of clinical and digital services.

Therefore, based on the above rationale, we give a ‘Speculative Buy’ recommendation on the stock at the closing price of CAD 1.39 on 17^th March 2020.

WELL Daily Technical Chart (Source: Thomson Reuters)

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