Medical staffing company is planning to grow primarily through a ‘roll-up’ strategy
Capital Ideas Media | November 5, 2020 | SmallCapPower: We know we’ve written a lot about healthcare recently but, hey, the sector has been hot due to the unfortunate situation surrounding the spread of COVID-19.
(Originally published on Capital Ideas Media on September 15, 2020)
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Capital Ideas Media is constantly searching for investment trends that we think will benefit our subscribers long term. So, hopefully you won’t mind if we write about another healthcare stock this week.
Premier Health of America Inc. (TSXV:PHA) popped onto our radar recently as a little-known, yet speculative, Canadian healthcare play with a stock price in a healthy uptrend.
Premier Health began trading on the Toronto Venture Exchange on March 3, 2020, and describes itself as a ‘healthtech’ company that provides a range of staffing and outsourced services solutions.
Simply put, the Company’s digital platform connects medical professionals with healthcare facilities that have specific staffing needs. PHA has been operating primarily in Quebec and Nunavut, but is expanding its services into Alberta, Manitoba and Ontario.
Premier Health recently reported Q3 2020 revenue of $5.5 million, a 118% year-over-year increase and ninth consecutive quarter of growth, while its EBITDA for the period soared nearly 300% to $825,000. The Company said its third-quarter results exceeded expectations, as the majority of its governmental contracts were renewed early in calendar year 2020.
Premier Health added that COVID-19 has caused daily demand for medical personnel to increase by 50% on average, which it expects will continue at least in the short term.
This Company is not only growing organically but it also announced its pending acquisition of Code Bleu, one of prominent medical staffing agencies in Quebec.
In 2019, Code Bleu generated revenue of approximately C$29.3 million, EBITDA of $3.9 million, and net income of $2.8 million. PHA will pay C$17 million for the company, consisting of $10 million in cash and $4.5 million in Premier Health stock, with the remainder in deferred payments over three years subject to performance objectives.
Premier Health plans to grow primarily by acquisitions during the next five years, as it believes the Canadian market for medical staffing is fragmented and ripe for consolidation.
In Quebec, PHA is targeting a 25% market share, which it believes is achievable by acquiring two or three local businesses. The Company also said it is actively looking to acquire a foothold in at least one major center in another province.
Premier Health of America investors have benefitted from the Company’s tight capital structure (just 38.7 million shares outstanding), which has also made the stock somewhat illiquid. This is a highly speculative play for those comfortable with a high level of risk.
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