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Filing
(4) Industry
The healthcare agency industry seems quite fragmented. In Quebec, there are around 40 agencies that are all privately held. Currently, PHA might count around 5% to 10% of the total market(if not counting Code Bleu). After the Code Bleu acquisition, it will achieve a 25% market share in Quebec.
2. Management
7.Links
Filing
Jan. 3, 2021
Year-end: Sept. 30, Based on Year-end 2020.
Price: $0.87 Shares:45m, Cap: $39m
Year-end: Sept. 30, Based on Year-end 2020.
Price: $0.87 Shares:45m, Cap: $39m
2.3m options + 3.3m warrants at a very low price.
1.Business
(1) History
(1) History
The company was founded by Martin Legault in 2003 as a health care sector agency. It is originally called Groupe Premier Soin(GPS) and is still a subsidiary of PHA. It is somewhat similar to Nove Leap Health but mainly for nurses, not for PSW.
From 2003 to 2016, the company grew its business organically. It also had developed a digital platform that seems very competitive. By 2016, it became a provincial player in Quebec.
In 2017, it acquired 3 small competitors and had revenue of around 6m.
In 2018, it acquired Excel Sante Inc for $1.25m which has around $3m in sales. In 2020, it has contributed $8.3m in revenue. The acquisition seems very successful.
In early 2020, it IPOed through a reverse merger. The original price is just around $25c. The price has gone up quite a lot already. For the full year 2020, it has generated 20m in revenue and $2.1m in EBITDA. Almost doubled its revenue without new acquisition. The main reason is that Quebec has passed new legislation that effectively raised health workers' salaries. Which in turn has raised both the company's revenue and gross margin.
After the year-end 2020, the company acquired Code Bleu in Nov. 2020. The price is $17m which consists of $10m in cash, $4.5m in stock at $0.59/share, and $2.5m performance payment in 3 years. Code Bleu has revenue of around 29m and an EBITDA of $3.9m in 2019. The company is targeting over 50m in revenue by year-end 2021.
(2) Major business
Currently, the company has 19,000 workers in its system and 500 customers. It has around 1500 active employees normally. Its major advantage is its IT system which can confirm an assignment within 10 minutes after a customer makes a request through its call center. Also, it can automatically log its contractors when performing the task it assigned through mobile apps. It can also automatically generated invoices and payroll information. It seems pretty advanced.
The company seems to be able to generate around 25% in gross margin and around 10% in EBITDA.
(3) Debt and cash
At the end of fiscal 2020, it has around $2.5m in debt and $1.2m in cash. After the acquisition of Code Bleu, it should add another $10m in debt. The interest rate is below the primer rate +2%, which should be less than 5%.
At the end of fiscal 2020, it has around $2.5m in debt and $1.2m in cash. After the acquisition of Code Bleu, it should add another $10m in debt. The interest rate is below the primer rate +2%, which should be less than 5%.
(4) Industry
The healthcare agency industry seems quite fragmented. In Quebec, there are around 40 agencies that are all privately held. Currently, PHA might count around 5% to 10% of the total market(if not counting Code Bleu). After the Code Bleu acquisition, it will achieve a 25% market share in Quebec.
2. Management
Martin Legault is the founder and still the CEO of the company since 2003. Previous to 2003, he worked as a human resource director for a company. Based on tikr.com data, he owns over 50% of the total shares.
3. Financial data
4. Valuation and comments
(1) The company is currently is trading close to 20 times to its EBITDA. The P/E ratio is even higher. It is not very cheap based on that. However, it is growing quite well both organically and by acquisition. If the high gross continues, then the current price becomes acceptable. Assume by fiscal 2022, it can achieve $60m revenue. It should be able to generate around $6m in EBITDA and around $4.5m in net income. Then it can double the current price.
(1) The company is currently is trading close to 20 times to its EBITDA. The P/E ratio is even higher. It is not very cheap based on that. However, it is growing quite well both organically and by acquisition. If the high gross continues, then the current price becomes acceptable. Assume by fiscal 2022, it can achieve $60m revenue. It should be able to generate around $6m in EBITDA and around $4.5m in net income. Then it can double the current price.
(2) Both the Excel Sante and Code Bleu acquisition are very cheap and the first one turned out very successful. Don't know the reason how they can get such a good deal. It is possible that their system is much better than its competitors and it creates an attraction to them.
(3) The company seems to have the best IT system which could be disruptive in this niche market. It will need to expand to other provinces like Ontario etc.
5. Risk
(1) It is a new IPO and there is very limited information about the company and its management.
(1) It is a new IPO and there is very limited information about the company and its management.
(2) The new acquisition might not work as expected.
6. Conclusion
The company seems managed well and has very high growth potential. However, since it is a new IPO and limited information available, shouldn't be heavily invested.
7.Links
