Protech Home Medical Corp

Protech Home Medical Corp (TSXV: PTQ) is a company that provides in-home monitoring equipment, supplies, and services to patients. The company's services consist of Daily & Ambulatory Aides, Power Mobility, INR Self-Testing, Respiratory Equipment Rental, Home ventilation, Oxygen Therapy, and Sleep Apnea & PAP Treatment.

Key highlights 

• Acquired Mayhugh’s Medical Equipment: Recently, the company acquired Mayhugh’s Medical Equipment “MME”, a company based in Florida, reporting unaudited trailing 12-month annual revenues of approximately USD 7 million, Adjusted EBITDA of USD 1.2 million, and positive net income. The acquisition increases the company’s active patient count by more than 10,000. It also provides immediate access to Jacksonville, an attractive metro hub in which it would leverage its existing infrastructure to create significant cross-selling and patient growth opportunities.

• Accelerated organic growth initiatives: The company is rapidly expanding as it has opened two new locations at in Daytona Beach, Florida and Concord, New Hampshire, focused on respiratory therapy products and services. It expects to derive strong revenue synergies from the initiative of opening new locations organically and would continue to implement its high touch service model in both new locations. Presently it has 51 locations across 11 U.S. States.

• Strong Liquidity:As of December 31, 2020, the Company had cash on hand of USD 23.6 million, besides a line of credit availability of USD 13.8 million. The current liquidity seems to be enough to meet its liabilities and run its operations without any disruption.

 Financial overview of Q1 2021 (in thousands of USD)

Source: Company 

• In Q1 2021, the company’s revenue increased by 32% to USD 22.7 million, against USD 17.2 million in the previous corresponding period. The increase in revenues was primarily due to the acquisitions, while 11% was through organic growth.
• The company posted an EBIT of USD 1.8 million against a negative EBIT of 0.3 million in the previous corresponding period. The EBIT was partially offset by higher operating expenses, increased due to the acquisitions.
• The company posted a net profit of USD 0.22 million against a loss of USD 1.3 million in the previous corresponding period. 

Risks associated with investment

The company’s activities are exposed to various risks beyond its control that could affect its operations and business. Adverse changes in the conditions in the specific markets for the company’s products and services, conditions in the domestic or global economy generally, competition, currency risk, and interest rate risk are some factors which can affect the group’s performance.

Valuation Methodology (Illustrative): EV to Sales 

Note: All forecasted figures and peers have been taken from Thomson Reuters 

Stock recommendation

The momentum across its business continues to be robust, as evidenced by the company’s first-quarter financial and operating results. The management expects to witness similar strong trends in the second quarter also. The company can leverage its patient-centric platform to make sizeable acquisitions in new and existing markets and integrate them with ease. It is transforming into a national provider of respiratory home care in the United States. Furthermore, its strong recurring revenue platform provides further stability and consistency related to the company’s growth outlook. Therefore, based on the above rationale and valuation, we recommend a “Hold” rating at the closing price of CAD 2.43 as of April 05, 2021. We have considered Hamilton Thorne Ltd, Medexus Pharmaceuticals Inc, Cipher Pharmaceuticals Inc, as the peer group for the comparison.

1-Year Price Chart (as on April 5, 2021). Source: Refinitiv (Thomson Reuters)

Hamilton Thorne Ltd

Hamilton Thorne Ltd. (TSXV: HTL) is engaged in developing, manufacturing, and selling precision laser devices and advanced image analysis systems for living cell applications in the fertility, stem cell, and developmental biology research markets. The Company offers Clinical lasers, Research lasers and Clinical Sperm Analysis Products.

Key highlights 

• Management shared its preliminary numbers for FY2020: Recently, the management shared their preliminary unaudited results, 2020, where revenues increased 12% to a record USD 39.7 million with adjusted EBITDA for the year of approximately USD 6.5 million. The organic growth on a constant currency basis was approximately 1%, while gross profit margins were about 51.2% for the year.  

• Focused on enhancing margins: The Company sees the opportunity to increase margins over time by adding more branded products, expanding its direct sales into both new and existing markets, and over the long-term, by taking advantage of economies of scale as it grows.

• Improving liquidity: The Company's cash balance on September 30, 2020, was approximately USD 19.9 million, which increased by USD 7.1 million compared to USD 12.7 million on December 31, 2019. Working capital increased to USD 21.2 million on September 30, 2020, from USD 11.2 million on December 31, 2019. The increases in cash balances and working capital were primarily due to the completion of a private equity placement of USD 4.9 million and the generation of higher operating income. 

Financial overview of Q3 2020 (In USD)

Source: Company 

• In Q3 2020, the company reported revenues of USD 9.8 million, which increased by 10% compared to USD 8.8 million in the previous corresponding period. Higher sales from the human clinical market and cell biology/research markets helped the company to grow its sales.
• Gross profit increased 3% to USD 4.9 million in Q3 2020, compared to USD 4.7 million in the previous corresponding period.
• Income from operations stood at USD 0.7 million, against USD 0.6 million in pcp. The total expenses were at par with the previous corresponding period.
• The company’s net income grew to USD 0.45 million, against USD 0.32 million in pcp. 

Risks associated with investment

There are trends and factors beyond the Company’s control that affect its operations and business. Such trends and factors include adverse changes in the conditions in the specific markets for the Company’s products and services, the conditions in the broader market of laboratory instruments, consumables and accessories and conditions in the domestic or global economy generally and competition. 

Valuation Methodology (Illustrative): EV to Sales

Note: All forecasted figures and peers have been taken from Thomson Reuters 

Stock recommendation

Despite the headwinds from the Covid-19 pandemic, the company grew its sales by over 12% for the year to USD 39.7 million and closed off 2020 with its best quarter ever. The management is highly optimistic about the long-run, but cautious in the short term, particularly the first half of 2021. In part due to encouraging progress with vaccines, ART clinics are open, and they are operating at roughly 90% of capacity. Furthermore, the company is planning to continue making investments in personnel, R&D programs, and systems to support growth, balance top-line growth with sustained EBITDA performance in the mid-term and EBITDA expansion over the longer term. Therefore, based on the above rationale and valuation, we recommend a “Hold” rating at the closing price of CAD 1.760 on April 05, 2021. We have considered HLS Therapeutics Inc CRH Medical Corp, Opsens Inc, as the peer group for the comparison.

1-Year Price Chart (as on April 5, 2021). 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.