Viemed Healthcare Inc

Viemed Healthcare Inc (TSX: VMD), provides equipment and home therapy service to 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

• Foray into the new segment:The Company announced its foray into Remote Patient Monitoring (RPM) segment 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 launch into the healthcare technology sector. This will immediately allow the company’s salesforce to offer a new revenue source to its physician network around the country.

• Untapped market opportunity: The company is well-positioned to pursue sustainable growth and profitability through leveraging its brand awareness, realizing operational synergies, expansion of its product and service offerings and pursuing growth into new US states, not covered by the group.

Source: Company

• Reaffirmed Revenue Guidance:In Q4 2020, the company strongly believes in generating net revenues of approximately USD 26 million to USD 27 million from its core business, and additional revenues of about USD 5 million to USD 6 million from sales and support related to the COVID-19 pandemic. Hence the total revenues are estimated to be in a range of USD 31 million to USD 33 million.

Financial overview of Q3 2020 (Expressed in thousands of U.S. Dollars)

Source: Company

• The company recorded significant growth in net revenues during Q3 2020. Net revenues from core business stood at USD 24.9 million, an increase of 22% compared to the previous corresponding period. Total revenues were USD 33.4 million, including approximately USD 8.6 million of product sales and services related to the ongoing COVID-19 pandemic.
• In Q3 2020 the company's operating income was USD 4 million, increased by 90% compared to USD 2.1 million in Q3 2019, due to higher revenues.
• Net income registered by the Company in Q3 2020 totalled USD2.8 million, compared to USD 2.85 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

All forecasted figures and peers have been taken from Thomson Reuters 

Stock recommendation

The Company expects to generate net revenues of USD 31 million-USD 33 million. The group also witnessed the significant growth in its core business and generated revenue of USD 25 million in the reported quarter, which is quite impressive. A foray into a new segment would also immediately allow the company's salesforce to offer a new revenue source to its physician network around the country, looks impressive. At present, the company maintains the highest ever cash balance of USD 32.4 million, with long-term debt of only USD 7.2 million in its books, which reflects the company's sturdy health. Therefore, based on the above rationale and valuation, we have given a "Speculative Buy" rating at the closing price of CAD 10.08 on January 5, 2021. We have considered Electromed Inc, Itamar Medical Ltd, etc. as the peer group for the comparison.

1-Year Price Chart (as on January 05, 2021). Source: Refinitiv (Thomson Reuters)

Baytex Energy Corp

Baytex Energy Corp (TSX: BTE) is a North American focused oil and gas company based in Calgary, Alberta. The corporation operates in Canada and the United States. The Canadian operating segment includes light oil assets in the Viking and Duvernay, heavy oil assets in Peace River and Lloydminster and conventional oil and natural gas assets in Western Canada.

Key Updates:

• Ample Liquidity: The group has an undrawn credit facility of CAD 426 million, and the company is expected to remain onside with financial covenants and maintain liquidity, which is a key positive. Moreover, the company’s does not have any debt maturity till 2024, which augurs well for sustainable liquidity in the foreseeable future.

Source: Company Presentation

• Capital Efficiency to Combat lower Commodity prices: The company is expected to generate strong capital efficiencies of approximately cad 12,000 per boe/d across the portfolio. This represents a 30% improvement over our 2020 budget and reflects the high grading of the portfolio in response to lower oil prices and the group’s diligent focus on driving further efficiencies.                                                    

Source: Company Presentation

• Capital Allocation: As per the FY21 budget, the Management would allocate ~85% of its capital program for the high netback light oil assets in the Viking and Eagle Ford while ~10% will be directed to the heavy oil assets at Peace River and Lloydminster. 

Q3FY20 Financial Highlights:

• BTE announced its quarterly results, wherein the company posted revenue, net of royalties at CAD 212.486 million, as compared to CAD 349.583 million in the previous corresponding period (pcp). The decline was primarily due to lower WTI prices (USD 40.93/bbl versus USD 56.45/bbl in pcp).
• The company registered a total expense of CAD 234.912 million, as compared to CAD 332.849 million. The decline was primarily due to lower operating expense (CAD 73.447 million versus CAD 97.377 million in pcp), significantly lower depletion and depreciation (CAD 106.454 million versus CAD 180.422 million in Q3FY19), coupled with a foreign exchange gain amounting to CAD 26.231 million, as compared to a loss of CAD 14.237 million in pcp.
• The company reported a net loss of CAD 23.444 million, as compared to a net profit of CAD 15.151 million.
• The group reported current assets of CAD 139.135 million, while total assets stood at CAD 3,156.414 million.                  

Q3FY20 Income Statement Highlights (Source: Company Reports)

Risks: The company’s revenue depends upon international crude oil prices. Volatility in the commodity prices would hinder the company’s overall performance.

Valuation Methodology: P/CF Based (Illustrative)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:

For FY20, the company has reaffirmed its production guidance of 80,000 boe/day, while BTE expects a royalty rate of 18% while operating expenses are estimated at CAD 11.20/boe to CAD 11.40/boe. Moreover, the company expects its exploration and development expenditures within CAD 260 million to CAD 290 million. We believe, with the gradual rise in the crude oil demand on account of higher industrials and manufacturing activities, the international commodity prices are likely to improve in the coming days, which would improve the group’s performance. We have valued the stock using P/CF based relative valuation method and have arrived at a target upside of double-digit (in percentage terms). For the said purpose, we have considered peers like Nuvista Energy Ltd, Crescent Point Energy Corp etc. Hence, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of CAD 0.86 on January 5, 2020.

BTE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

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