Premier Health of America Inc

Premier Health of America Inc (TSXV: PHA) is a Canadian Health technology company that provides a comprehensive range of staffing and outsourced services solutions for healthcare needs to governments, corporations, and individuals through its proprietary platform.

Key Highlights 

• Inaugurated non-ambulatory transport services: Following the granting of two long-term contracts in March 2021 comprising an anticipated 28,000 transport segments each year, the Corporation launched its transportation division operations in June. Expenses linked to the service's debut weighed on the Corporation's consolidated EBITDA for a while, but revenues for the division would be consolidated for a full quarter in the current fiscal year's fourth quarter.
• Robust performance: In comparison to the previous fiscal year, the company’s nine months period of the current fiscal year has demonstrated a spectacular performance. Its consolidated revenues for the first three quarters ending June 30, 2021, was CAD 49.0 million, up from CAD 13.8 million in the previous similar period, indicating a 255% increase. While EBITDA increased from CAD 1.5 million in pcp to CAD 4.2 million. Organic growth and the acquisition of Code Bleu were the major drivers for the revenue and EBITDA growth in the first three quarters of 2021.

Source: Company 

• Registered higher income from operations: In the first nine months of FY21, the company witnessed elevated income from operations at CAD 1.6 million compared to CAD 0.6 million in the previous corresponding period. The increase was primarily due to higher net income.

Financial overview of Q3 2021 (Expressed in CAD)

Source: Company

• In Q3 2021, the company’s revenue grew heavily to CAD 18.6 million against CAD 5.5 million in pcp, mainly attributable due to the consolidation of the Code Bleu and Solution Nursing acquisitions as well as organic growth.
• Gross income reported by the group stood at CAD 4.5 million against CAD 1.5 million in Q3 2020.
• The operating income registered by the company stood at CAD 1.1 million against CAD 0.4 million in pcp.
• On the back of robust revenue, the company made healthy operating profit and reported a net profit of CAD 0.64 million V/s CAD 0.40 million in pcp.
  

Risks associated with investment

A shortage of healthcare workers might result in greater recruitment and retention expenses, as well as a loss of clients and income, all of which would be detrimental to the organization. Furthermore, the company is subject to regulatory risk, capital and liquidity constraints, as well as financing concerns. Furthermore, because to the company's tiny market size classification, investors are subject to liquidity risk. 

Stock recommendation

To retain its growth trajectory, the company is growing organically and through acquisitions. The acquisitions of Code Bleu and Solution Nursing, which accounted for the majority of revenue and EBITDA growth in the first three quarters of 2021, had a substantial influence on sales, which grew to CAD 49.0 million from CAD 13.8 million in the pcp. The firm has been busy releasing new features and apps, and it expects a 2% yearly revenue increase as a result of these developments. Additionally, the Corporation started its non-ambulatory transport services in June, which would support the topline in coming quarters. On the valuation front, the stock is available at a significantly lower EV/Sales multiple of 0.9 on Next Twelve Months (NTM) basis, compared to the industry median of 6.0x. Hence considering the facts mentioned above and rationales, we recommend a “Speculative Buy” rating on the stock with a lower double-digit upside (in percentage term) at the closing price of CAD 1.24 on September 8, 2021. 

Technical Analysis Summary

One-Year Technical Price Chart (as on September 8, 2021). Source: REFINITIV, Analysis by Kalkine Group 

Kelso Technologies Inc

Kelso Technologies Inc. (TSX: KLS), is a railway equipment supplier that produces and sells tank car service equipment used for the safe loading, unloading and containment of hazardous materials during transport.  

Key Highlights

• Future business prospects appear to be promising: Despite present uncertainty, the Company's commercial prospects for the next three years look promising. It provides specialized solutions for a fleet of over 30,000 ethanol tank trucks that must meet new regulatory criteria by early 2023. Furthermore, the business has created new products that can service an estimated fleet of 85,000 pressure tank trucks.
• Growing tank car market: Industry projections indicate that the tank car market is entering a period of modest fleet growth coupled with growth in rail tank car utilization. New tank car demand is expected to grow to 14,800 tank cars in 2022 and 19,100 tank cars in 2023. The anticipated upswing in new build and retrofit activity for ethanol and pressure tank cars combined with a growing number of certified Kelso products are expected to provide new longer-term financial growth opportunities from rail operations.
• Product diversification:The company is a multi-faceted product engineering firm that specializes in the creation, manufacture, and marketing of unique transportation equipment. While its roots are in rail tank car equipment, new growth areas are a good fit for its commercial skills, and they're progressively expanding the pie.

Source: Company

Financial overview of Q2 2021 (Expressed in US Dollars)

Source: Company

• In Q2 2021, the company reported revenue of USD 2.1 million, compared to USD 2.5 million in the previous corresponding period. The decline in revenue was impacted by the unfavorable circumstances surrounding the COVID-19 pandemic.
• Gross profit stood at USD 0.95 million in Q2 2021 compared to USD 1.1 million in the previous corresponding period.
• Higher office & administration cost, consulting and filling fees and management fees dragged the company’s bottom line. The company posted a net loss of USD 0.39 million against a loss of USD 0.25 million in the previous corresponding period.
  

Risks associated with investment

The company is prone to many risks associated with its business's nature, which could hamper its performance. Some of these risks includes fall in demand from automobile manufacturers, disruptions from the supply chain, technological change, increased prices of raw materials and commodities, etc.

Stock recommendation

Margin performance improved marginally in the second quarter of 2021, indicating that the comeback to pre-pandemic business levels is developing slowly. Although the negative trends from decreased rail tank car activity in 2020 are still present in 2021, but there are strong signs of a strengthened rebound in the second half of 2021 and a rise in momentum in 2022. Furthermore, the need for new tank vehicles is also anticipated to rise to 14,800 in 2022 and 19,100 in 2023, which would be a key positive for the company. On the valuation front, the stock is available at forward EV/Sales multiple at 0.84x against the industry median of 1.8x. Hence, considering the aforesaid rationale, we recommend a “Speculative Buy” rating on the stock at the closing price of CAD 0.79 on September 8, 2021 with a lower double digit (in percentage terms) upside potential.

Technical Analysis Summary

One-Year Technical Price Chart (as on September 8, 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.