CloudMD Software & Services Inc

CloudMD Software & Services Inc (TSXV: DOC) is digitizing the delivery of healthcare by providing patients access to all points of their care from their phone, tablet or desktop computer. The company offers SAAS based health technology solutions to medical clinics across Canada and has developed proprietary technology. 

Key highlights

• Record Q2 2021 revenue: The company clocked record revenue of CAD 15.7 million, an increase of 461% compared to CAD 2.8 million in Q2 2020. The increase is primarily attributable to acquisition growth with 4 acquisitions completed in the quarter, and 14 acquisitions completed in the last twelve months. Excluding the impact of Q2 2021 business acquisitions, the Company achieved a 9% organic growth rate from its existing businesses over Q1 2021.

• Focused on creating innovation:  The organization is focused on driving innovation in healthcare delivery by utilizing technology to increase access to treatment and enhance health outcomes. The company's growth strategy is multi-pronged, focusing on organic growth, accretive mergers and acquisitions, and asset leveraging across all divisions. We anticipate that the company's potential would be tapped by innovative technologies when it deploys and adopts the Complete Health Platform in the second half of 2021.
• Winning through proprietary platform: The company's proprietary platform has been applied to its Enterprise Health Solutions Division, which now offers a comprehensive full-service employer healthcare platform. It has already witnessed high adoption rates, as well as cost savings and cross-sell synergies, throughout its customer base, which is a key positive. Moreover, with the acquisition of Oncidium, the company's EHS business has grown to become the company's largest and fastest-growing segment, with annualized revenue exceeding CAD 70 million and profitable operations. Furthermore, it has a robust sales pipeline and remains focused on driving additional growth by securing multi-year contracts with clients across North America.
  

Financial overview of Q2 2021 (in thousands of Canadian Dollars)

Source: Company

• In Q2 2021, the Company reported healthy revenue of CAD 15.66 million, an increase of 461% as compared to CAD 2.8 million in the previous corresponding period. The increase was primarily attributable inorganic growth with 4 acquisitions completed in the quarter, and 14 acquisitions completed in the last twelve months.
• The gross profit increased to CAD 5.5 million in the reported period against CAD 1.0 million in pcp. The increase was primarily attributable to a revenue mix where higher margin revenues from Enterprise Health Solutions and Digital Services made up a stronger overall revenue percentage.
• The Company witnessed many folds increased in its total operating expenses, which stood at CAD 11.5 million against CAD 3.4 million in pcp. The rise in expenses was mainly due to higher G&A expenses, higher sales and marketing expenses, share-based compensation, and integration cost.
• On the back of higher operating expenses, as discussed above, the Company’s net loss increased to CAD 5.9 million in Q2 2021, compared to CAD 2.7 million in pcp.
  

Risks associated with investment

The company is exposed to various market risks in the ordinary course of operations that could impact its earnings and cash flows. Some important risk factors are General Healthcare Regulation, Reliance on third-party service providers, Competition, Shortage of Healthcare Professionals, Cybersecurity, etc.

Valuation Methodology (Illustrative): EV to Sales 

Stock recommendation

Recently, the company delivered another strong quarter that reflects consistent growth across all divisions of the Company. Q2 2021 was an impactful quarter for CloudMD as it closed three of the largest acquisitions to date and added CAD 96 million to its annualized revenue run rate, which would be fully recognized in Q3 2021, which is a key positive. Additionally, the integration of its health technology solutions into one comprehensive healthcare ecosystem is on track and have achieved impressive early adoption rates which will continue to drive organic growth. Therefore, based on the rationale discussed above and valuation, we recommend a "Speculative Buy" rating at the closing price of CAD 1.79 on August 26, 2021. We have considered WELL Health Technologies Corp, Precipio Inc, Aleafia Health Inc, etc., as the peer group for the comparison. 

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

Technical Analysis Summary

One-Year Technical Price Chart (as on August 26, 2021). Source: REFINITIV, Analysis by Kalkine Group

Journey Energy Inc

Journey Energy Inc (TSX: JOY) is engaged in the exploration, development, and production of crude oil and natural gas in Alberta province. The company's principal revenue source is from petroleum and natural gas sales which include the sale of crude oil, natural gas and natural gas liquids, of which it derives key revenue from the sale of crude oil.

Key highlights 

• Elevated adjusted funds flow: In Q2 2021, the company recorded adjusted funds flow of CAD 9.0 million compared to CAD 3.2 million in Q2 2020. The combination of a 150% increase in average realized commodity prices; cost reduction strategies implemented in 2020 and their impact carrying forward into 2021; and the recent revenue stream from electricity generation all positively impacted Adjusted Funds Flow.
• Deleveraging the balance sheet: The Company ended the quarter with net debt of CAD 75.6 million, down 40% from June 30, 2020, and down 16% from the beginning of 2021. The firm has so far repaid CAD 10.75 million in term debt due in 2021. Furthermore, it is on pace to repay two tranches of AIMCo term debt totaling CAD 25 million in 2021, as planned. We believe this is positive for the company as it would bring down its interest expense and the margins will be pumped.
• Acquiring a private company: The business has declared its desire to buy a private company that produces around 610 boe/d (76% natural gas) mostly in Alberta's Nordegg and Grande Cache regions. The purchase price would be paid through the issuance of 3.5 million Journey's shares plus CAD 2.9 million in cash, and the transaction is scheduled to conclude in late August 2021.
  

Financial overview of Q2 2021 ) (in thousands of CAD)

Source: Company 

• In Q2 2021, the company generated revenue of CAD 25.41 million compared to CAD 8.05 million in the previous corresponding period. The rise in revenue was mainly due to an increase in average realized commodity prices.
• Total expenses in the reported period increased to CAD 25.7 million against CAD 23.5 million in pcp, mainly due to higher operating expenses, partially offset by lower depletion and depreciation.
• The company managed to minimize its net loss to CAD 0.3 million against a loss of CAD 15.4 million in pcp, which is a key positive.
  

Risks associated with investment

The company’s financial performance is largely linked to the volatility in crude oil and natural gas prices. Further, given the higher debt contribution in the group’s capital structure, the company is also exposed to balance sheet risk. 

Valuation Methodology (Illustrative): Price to Cash Flow 

Stock recommendation

The rebound in commodity prices, coupled with favorable price differentials, and a lower operating cost structure are combining to make Journey very sustainable well into the future. In addition, the recently announced acquisition of a private oil and gas producer would add approximately 600 boe/d and is expected to close in mid-August. Furthermore, the company clocked higher adjusted funds flow in Q2 2021 and expects to achieve an adjusted fund flow in a range of CAD 35-37 million in FY2021, which is appreciable. Therefore, based on the above rationale and valuation, we recommend a “Speculative Buy” rating on the stock at the closing price of CAD 1.13 on August 26, 2021. We have considered Altura Energy Inc, Yangarra Resources Ltd, etc., as the peer group for the comparison.

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

Technical Analysis Summary

One-Year Technical Price Chart (as on August 26, 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.