Yahoo Finance
Filing
Sept. 04, 2018
Q2 2018 Data
Price: $0.25, Shares: 208m, Cap: $52m
1.Basic Information
(1) History
The company was found by Brenda Rasmussen at around 2001 and originally was called Alegro Health Corp. It acquires private clinics in 2003. In 2007, it started to partner with Global Healthcare Investments Solutions (GHIS), a company found by South African entrepreneur Jack Shevel. Previously Jack Shevel created a healthcare company in South Africa called Net Care and grew it into a billion-dollar business. With the fund injected by GHIS, Alegro acquires more clinics and pharmacies. In 2009, after GHIS gain controlling stack of Alegro, it changed its name to Centric Health and Jack Shevel replaced Brenda Rasmussen as CEO. Brenda later left the company and created a new healthcare venture called Premier Health. Jack Shevel managed the company briefly and hired several new CEOs from outside. Mainly David Cutler from 2012 to 2017, then David Murphy starting in 2018.
At the time of IPO around 2003, the company had a revenue of around just $6m. Since 2009, its revenue starts to shoot up mainly by acquisition. By 2013, it reached the highest annual revenue of $456m. Since 2014, the company started to divest its business segments. Mainly the Physiotherapy, Rehabilitation and Assessments segment at 2015 for over $200m to pay down its debt. Its revenue rolls back to $160m level since 2015.
(2) Business-related.
Specialty Pharmacy: Fulfillment center for nursery home etc. Serving around 28,700 patients. Accounts around 3/4 of revenue and 3/4 of adjusted EBITDA. However, since 2018, there is a significant reduction in EBITDA for this segment because of government policy changes. At Q2 2018, EBITDA form this segment is only $2.7m compared to $2.2m in the other segment.
Surgical and Medical Centres: Currently it operates 5 surgery centers across Canada for some specialty surgeries. It counts for 1/4 of revenue but EBITDA has been growing pretty well. Utility ratio currently is around 41%.
The company also has a small equity interest in a device called Karie which dispense medical for older people automatically at home. It could generate around $50 monthly revenue. Currently the device still in the marketing stage.
(3) Management.
Jack Shevel: He was very successful in his previous Netcare business. However, as for Centric Health, it hard to tell how he did it. The company obviously was too aggressive from 2010 to 2013. It was a right decision to deleverage the business. Overall he seems to care about the business.
(4) Debt and Credit Facility.
Currently, it has around $81m in debt.
(5) Insider holding, options, Insider trading info, share buyback.
(6) Employee numbers
(7) Industry comparison.
(8) Major events
2. Financial data.
3. Valuation
(1) Currently, the company has around $16m in annual EBITDA, EV around $130m. Seems not very expensive. However, in cash bases, it operates just even which means no profit left for pay down debt.
(2) The company indicates that it will divest more business to pay down debt to around 3.5 times of the EBITDA. Currently, it is around 5 times.
(3) Today as Sept. 5, 2018, the company released a news of having a supply agreement with Spectrum Cannabis for supply Medical Cannabis to seniors. As a result, the share price jumped to $0.34 now. I view it as unreasonable but it had made the company no more attractive.
(4) As stated in the Q2 2018 conference, Q3 2018 financial might be even worse than Q2.
4. Risk
(1) The governments in Canada tend to be unfriendly towards private healthcare provider. Recent changes in pharmacy pricing hit the company pretty hard. The surgical center business might also be affected by government policies.
(2) Its debt is still too high and should go down to $50m level at least.
5. Conclusion
Overall I think the company has a large chance to turn around. However, the current price is no more attractive. Wait to see what will happen after Q3.
6.Links
