Viemed Healthcare Inc

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

• Robust performance in FY 2020: The pandemic posed more tailwinds than headwinds for the company, which resulted in a record year for it. The group posted a growth of 63.6% in revenues to USD 131.31 million, against USD 80.26 million in FY2019 and net income stood at USD 31.5 million, compared to USD 8.5 million for the year ended December 31, 2019.

• Revenue guidance for Q1 2021:The management strongly believes in generating net revenues of approximately USD 25.5 – USD 26.5 million from the core business, and additional revenues of about USD 2.3 – USD 3.3 million from sales and support related to the COVID-19 pandemic. Hence for Q1 2021, the total revenues, are estimated to be in a range of USD 27.8 – USD 29.8 million.

• Foray into the new sector:The Company announced its foray into “Remote Patient Monitoring” sector as they acquired a 5% interest in VeruStat, Inc, a newly created company focusing on (“RPM”), for approximately USD 600,000 using cash in hand. The investment is part of the Company’s entry into the healthcare technology sector. It would immediately allow the Company’s salesforce to offer a new revenue source to its physician network around the country.

• Healthy balance sheet: The Company had a cash balance of USD 31.0 million at December 31, 2020, increased in a great manner, against USD 13.4 million at December 31, 2019. The working capital stood at USD 24.2 million, against USD 1.9 million in the previous corresponding period.

Financial overview of Q4 2020

Source: Company

• Significant growth was registered in Q4 2020, as the Net revenues from core business stood at USD 26.1 million, an increase of 22% compared to the previous corresponding period. Total revenues came to USD31.2 million, including approximately USD5.1 million of product sales and services related to the ongoing COVID-19 pandemic.
• In Q4 2020 the company's operating income stood at USD 5.2 million, almost doubled against USD 2.6 million in Q4 2019. The increase in operating income was primarily due to higher revenues.
• Net income registered by the Company in Q4 2020, totalled USD 5.1 million, compared to USD 2.4 million in pcp, partially offset by higher income tax provisions and higher SG&A expenses. 

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 

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

Stock recommendation

The pandemic posed more tailwinds than headwinds for the company, which resulted in a record year for it. The group posted a growth of 63.6% in revenues to USD 131.31 million, against USD 80.26 million and net income of USD 31.5 million in FY2020, Furthermore for Q1 2021, the company expect to clock total revenue in a range of USD 27.8 - USD29.8 million. Moreover, with a robust liquidity the company remain optimistic about the strategic partnerships, organic growth, and acquisition opportunities that it expects to contribute to its expansion in 2021. Therefore, based on the above rationale and valuation, we recommend a "Speculative Buy" rating at the closing price of CAD 12.70 as on March 9, 2021. We have considered CRH Medical Corp, Itamar Medical Ltd, etc. as the peer group for the comparison.

1-Year Price Chart (as on March 09, 2021). Source: Refinitiv (Thomson Reuters)

Knight Therapeutics Inc.

Knight Therapeutics Inc. (TSX: GUD) is a specialty and generic drug manufacturing company. The company's principal business activity is focused on developing, acquiring, in-licensing, out-licensing, marketing, and distributing innovative pharmaceutical products, consumer health products, and medical devices in Canada and select international markets.

Key Updates:

• Commercialization of IBSRELA: The company announced the license agreement with Ardelyx, Inc., wherein GUD would commercialize IBSRELA, a therapy used for the treatment of irritable bowel syndrome with constipation in adults. Notably, IBSRELA was approved by Health Canada on April 15, 2020, and is now covered by most private insurance companies across Canada.

• Consistent decline in total debt: The company reported a consistent decline in total debt, which is expected to enhance the overall financial flexibility. The group reported total debt of CAD 47.8 million, declined 6.82% and 26.01% from Q2FY20 and Q1FY20, respectively. A lower debt component would likely to boost the company’s profitability and margin profile. Also, reduces balance sheet risks.

Q3FY20 Financial Highlights:

• GUD declared its quarterly result, wherein the company posted significant growth in revenue, which stood at CAD 45.239 million, against CAD 4.030 million in the previous corresponding period (pcp). The increase was aided by the positive impact of GBT acquisition, coupled with the improved traction from Impavido ^® and in-licensing of Trelstar ^®.
• The group witnessed a higher selling and marketing expense, a considerable increase in general and administrative costs (CAD 7.763 million versus CAD 1.146 million in pcp), and higher research and development expense, which has resulted to a higher operating loss of CAD 7.735 million, as compared to CAD 3.922 million in pcp.
• The company reported a gain in financial instruments amounting to CAD 12.873 million, as compared to a loss of CAD 4.883 million in pcp and a net gain on mandatory tender offer liability amounting to CAD 10.502 million in pcp.
• Net income for the period stood at CAD 17.492 million, against a loss of CAD 2.959 million in pcp.
• The group reported cash, cash equivalents and a restricted cash balance of CAD 218.091 million, while total assets were recorded at CAD 1,013.963 million.

Q3FY20 Income Statement Highlights (Source: Company Reports)

Risks: The products of the company are subjected to regulatory approvals and might be time-consuming, which might further impact the product-pipeline.

Valuation Methodology (Illustrative): EV to Sales

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

Stock Recommendation:

With the commercialization of IBSRELA, we expect improved traction from the bowel syndrome with constipation patients across Canada, which is a key positive. Moreover, in order to combat the current COVID 19 scenarios, the group has taken steps to establish digital and virtual channels to ensure that physicians and patients continue to receive continued support, which further augers well for stable operational performance. We have valued the stock using the EV to Sales-based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like K-Bro Linen Inc, Jamieson Wellness Inc etc. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of CAD 5.35 on March 09, 2021.

1-Year Price Chart (as on March 8, 2021). Source: Refinitiv (Thomson Reuters)

Disclaimer

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