Andlauer Healthcare Group Inc

Andlauer Healthcare Group Inc (TSX: AND) is an investment holding company and operates in two segments, namely Specialized Transportation and Healthcare Logistics. The company generates primary revenue from the Specialized Transportation segment.

Key Highlights:

• Elevated Financials: Over the years, the company reported higher revenue and constant increase in the EBITDA, which indicates higher product acceptability and is a key positive. Notably, revenue and EBITDA recorded a CAGR of ~9% and ~10.5%, respectively during FY16 to FY20, which is encouraging. The improvement was driven by the company’s closed-Loop network support in Canada coupled with Specialized Infrastructure and Technology Platform offerings for its consumers. The company reported constant margin improvement during the years, which indicates operational efficiency.

Source: Company Presentation

• Outperformed the median Industry Margin: The company reported a better margin than the industry median. In FY20, Gross margin and EBITDA margin stood at 58.2% and 25.10%, respectively, compared to the industry median of 29.50% and 12%, respectively. Moreover, the company reported its net margin at 12% in FY20, higher than the net margin of 4% of the industry median.

Source: Refinitiv (Thomson Reuters)

• Event Update: The company would disclose its Q1FY21 result on May 11, 2021.

FY20 Financial Highlights:

• AND announced its full year result, wherein the company posted total revenue of CAD 314.340 million, up 8.4% on y-o-y basis. The company posted higher income from logistics and distribution segment and ground transportation segment.
• Operating income stood at CAD 50.939 million as compared to CAD 44.993 million in FY19. The improvement was primarily attributable to higher income, partially offset by higher cost of transportation and services (CAD 131.392 million v/s CAD 121.405 million in FY19) and an increase in selling, general and administrative expenses (CAD 28.613 million v/s CAD 23.092 million in FY19).
• EBITDA stood at CAD 78.912 million, as compared to CAD 70.554 million in the previous year.
• Net income and comprehensive income were reported at CAD 37.714 million, increased 24.3% on y-o-y basis.

Source: Company Presentation

Risks: The group’s operations might witness a setback due to the extended travel restrictions, self-imposed quarantine periods, temporary closures, or restrictions of non-essential businesses, etc.

Valuation Methodology (illustrative): EV to EBITDA based

All forecasted figures and peers have been taken from Thomson Reuters

Stock Recommendation:

The company reported improved operating metrics, wherein net debt to LTM EBITDA improved to 1.63x, as compared to 1.88x in FY19. A lower net debt to EBITDA indicts higher financial flexibility. We believe the company’s long-term business prospects remain extremely positive, driven by a higher number of healthcare and adjacent products with unique logistics needs, supported by increasing demand for distributed and ancillary healthcare logistics services. Moreover, as per the current industry trend, healthcare logistics and transportation spending have increased in the recent past, which is a key positive. The group is also focusing to expand its operation by leveraging the existing nationwide network and through improved client relationships and the acquisition of new client contracts. We have valued the stock using the EV to EBITDA based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered industry (Healthcare) mean on an NTM basis. Based on technical analysis, the stock has support at CAD 31.0 level. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock at the last closing price of CAD 36.44 on May 03, 2021.

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

One-Year Price Chart (as on May 03, 2021). Source: Refinitiv (Thomson Reuters)

CloudMD Software & Services Inc.

CloudMD Software & Services Inc. (TSXV: DOC) is digitizing the delivery of healthcare by offering patients access to all points of their care from their phone, tablet computer. The company used SaaS-based health technology solutions for the above platform.

Key Highlights:

• Acquisition of Oncidium to support future growth: Recently, the company acquired Oncidium, which is a health care technology company and has more than 500 clients, higher than 1,000 health care providers and medical assessors, and has clients with more than 2 million employees across the country. This acquisition is expected to add a revenue of more than CAD 37 million on an LTM basis and would provide cross-selling opportunities through 5,500 loyal corporate clients, which is a key positive.
• Improved Macros: In the recent past, the company has witnessed an upsurge in demand for clinic services and pharmacies, as the whole world is taking precaution to mitigate the spread of the virus. The company provides a unique healthcare navigation platform that leverages a database of 17,000 specialists, which reduces the waiting time of the patients. Moreover, the company also provides solutions like personalized care plans to individuals and through its platform the company have access to primary and specialist care, mental health support, healthcare navigation, rehabilitation, and educational resources.

FY20 Financial Highlights:

• CloudMD Software & Services Inc. declared its full year results, wherein the company posted revenue of CAD 15.016 million, higher than CAD 6.770 million in the previous corresponding period (pcp).
• Operating loss was recorded at CAD 12.711 million, as compared to a loss of CAD 4.378 million in the previous corresponding period (pcp). The decline was due to higher sales and marketing costs, coupled research and development expenses, and a significantly higher general and administrative.
• The company posted a net loss of CAD 12.327 million, v/s a loss of CAD 4.718 million in FY19.
• Cash and cash equivalents stood at CAD 59.714 million, while total assets stood at CAD 121.860 million.

Source: Company Report

Risks: The operations depend upon the product acceptability across the targeted audience, while a change in preferences might dampen the overall demand dynamics. Moreover, the arrival of a new player might lead to price competition.

Stock Recommendation:

During the FY20, the company successfully completed six business acquisitions and expects that its FY21 revenues to remain significantly higher than FY20, supported by the positive impact from these acquisitions. Going forward, the company would focus on acquisitions of products, capabilities, clinical specialties and technologies which are highly scalable and would complement to the company’s growth strategies. The company also collaborated with the leading insurers and corporations across Canada, which is expected to deliver improved business prospects in the coming days. On the valuation front, the stock is available at a forward EV/Sales multiple of 3.2x, which is significantly lower against the industry median multiple of 5.7x. Based on technical analysis, the stock has support at CAD 1.75 level. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock at the last closing price of CAD 2.13 on May 03, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock if the price closes below the support level.

One-Year Price Chart (as on May 03, 2021). Source: Refinitiv (Thomson Reuters)

Disclaimer

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