Viemed Healthcare Incorporation

Viemed Healthcare Incorporation (TSX: VMD) provides equipment and home therapy services to 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 patients' homes with respiratory conditions.

Key Highlights 

• Revenue Guidance for Q4FY21:The management is confident that its core business will generate net revenues of USD 27.8 - 28.8 million, with extra revenues of USD 1.5 –1.7 million from sales and support connected to the COVID-19 pandemic. As a result, overall sales for Q4FY21 is expected to range between USD 29.3 to 30.5 million.
• Increase in Ventilator Patient Count: The company grew its ventilator patient count by 5.3% to 8,200 over 7,788 ventilator patient count on September 30, 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 76.5% and 80.2% of the traditional revenue in Q3FY21.

Source: Company

• Improving Operating Matrix: Despite the turmoil, the company maintained its pace and witnessed spirited performance across its operating matrix, registering sequential growth, which is a key positive. However, the gross margin in the reported period declined slightly. VMD is continuously working closely with customers. Thus, its presence is increasing along volume, which is appreciable. We expect the momentum to continue in the foreseeable future.

Source: REFINITIV, Analysis by Kalkine Group

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

Source: REFINITIV, Analysis by Kalkine Group 

Financial Overview of Q3FY21 (in USD thousands)

Source: Company

• In Q3FY21, the company posted lower revenue at USD 29.3 million than USD 33.4 million in the previous corresponding period. The revenue reduction was primarily due to poor performance in the COVID-19 response sales and services sector, which saw revenue drop to USD 1.5 million from USD 8.5 million in pcp.
• Gross profit stood at USD 18.4 million compared to USD 19.5 million in the previous corresponding period.
• In Q3FY21, its operating income stood at USD 2.9 million against USD 4.0 million in pcp. The decrease in operating income was primarily due to lower gross profit.
• Net income registered by the company in the reported period totalled USD 1.8 million, compared to USD 2.8 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, the 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 

Despite headwinds associated with the Delta variant, the company reported another record-breaking quarter and prioritised expanding its active patient base by entering new target states via geographic expansion. Furthermore, the company concentrates on growing its service and home-based product offerings to cover more severe illnesses. In the coming quarters, the above is projected to result in organic growth for the company. In addition, net revenues for the fourth quarter of 2021 are expected to range between USD 29.3 and 30.5 million. Hence considering the aforesaid facts, we recommend a "Speculative Buy" rating on the stock of VMD at the last traded price of CAD 6.68 on December 02, 2021. We have considered peers like Quipt Home Medical Corp, Greenbrook TMS Inc, Ontrak Inc etc., as the peer group for comparison.

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

One-Year Technical Price Chart (as on December 02, 2021). Source: REFINITIV, Analysis by Kalkine Group

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

Titanium Transportation Group Inc.

Titanium Transportation Group Inc. (TSXV: TTR) is an asset-based transportation and logistics firm that provides truckload, dedicated cross-border trucking services, freight logistics, warehousing, and distribution. The company is organized into two segments: the Truck Transportation segment and the Logistics segment.

Key Highlights 

• Robust Q3FY21 Results: The company reported record revenue for the fifth quarter in a row, up 93.2% to CAD 101.7 million, owing to exceptional growth in both operating segments. For the second time in its history, it has surpassed the CAD 100 million mark. Even adjusted EBITDA increased by 31.3% to CAD 7.2 million, while EBITDA increased by 7.8%.
• Overcoming the Challenging Conditions: The company continually adapts to adverse operational conditions that have impacted margins in both business segments, such as significant supply chain constraints, high inflationary pressure, and tighter labor markets. The Titanium team has demonstrated its focus and agility in navigating the ever-changing economic climate.
• Healthy Guidance for 2021: Titanium's strategic investments in growth possibilities and strong execution helped the management as economic conditions improved, partly due to the relaxation of some of the limitations connected to the ongoing COVID-19 outbreak. A notable positive is its decision to raise its FY21 annual guidance to roughly CAD 350 million in revenue.
• Integrating ITS Group: The company's plans for integrating the ITS Group, which was acquired in Q1FY21, has gone according to plan, and despite a softening of margins in the trucking segment, profitability is expected to improve in the coming quarters as it targets more operational efficiencies along with improving market conditions.

Financial Overview of Q3FY21 (in CAD thousands)

Source: Company 

• In Q3FY21, the company's reported revenue increased 93.2% to CAD 101.7 million, against CAD 52.6 million in the previous corresponding period. The increase in revenue reflected a combination of rapid organic US freight brokerage growth and contribution from the ITS acquisition.
• On the back of higher revenue, the total expenses increased to CAD 94.4 million in Q3FY21, against CAD 45.9 million in pcp. Total expenses as a % of revenue increased to 92.9% from 87.3%.
• The company posted lower income before income tax at CAD 1.8 million against CAD 3.5 million, primarily due to higher depreciation.
• Due to the above-discussed rationales, the company's net income for the reported period stood at CAD 1.4 million against CAD 2.7 million in the previous corresponding period.
  

Risks Associated with Investment

The company's business is subject to several risk factors, including the duration and impact of the COVID-19 pandemic on the global economy. Further, the company is exposed to forex risks as most of the group's revenue comes from the abroad market, especially in USD. 

Valuation Methodology (Illustrative): EV to EBITDA based

Stock Recommendation 

Titanium's business capabilities, including the ability to successfully execute and integrate a transformative acquisition and enter new US markets amid a moment of economic uncertainty, were on display in Q3FY21, with record top-line sales growth and maintained profitability. The ITS Group's integration is also paying off handsomely. Looking ahead, the business is focused on profitability and strategic execution of growth plans, both organically and through acquisitions, including extending its US Logistics operations, despite the uncertain economic situation. Therefore, based on the above rationale and valuation, we recommend a "Speculative Buy" rating on the stock at the closing price of CAD 2.75 on December 02, 2021. We have considered Mullen Group Ltd, PAM Transportation Services Inc etc., as the peer group for comparison purposes.

One-Year Technical Price Chart (as on December 02, 2021). Source: REFINITIV, Analysis by Kalkine Group

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

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.