Nova Leap Initiation Report Healthcare: Canadian Small Cap September 18, 2018
Alp Erdogan, MBA | Analyst | Ubika Research Alp@UbikaResearch.com | 1 (647) 479-5690
Alexander Cardno | Associate | Ubika Research Alexander@UbikaResearch.com | 1 (519) 781-2426
Nova Leap Health Corp. (TSXV:NLH) offers equity investors a compelling growth story in the next 12-24 months
Market Data (TSXV:NLH)
Price (September 18, 2018) $0.35
52 Week Range$0.14 – $0.45
Market Cap $18M
Fully Diluted Current Shares Outstanding68.9M
Free Float 56%
Average Daily Volume (3 Months)33.5K
Total Debt* US$3.9M
Total Current Assets* US$2.9M
Revenue (FY2016) US$0.1M
Revenue (FY2017) US$1.1M
Headquarters Halifax, Nova Scotia, Canada
Wayne Fulcher 17.3%
Dana Hartfield 4.7%
Chris Dobbin, CPA, CA President, CEO
Megan Spidle, CPA, CACEO
Dana Hatfield, CPA, CALead Indep. Director
Michael O’Keefe, MBA, CPAIndependent Director
Wayne MylesIndependent Director
*as of September 18, 2018 ** based solely on organic growth, excluding M&A All figures in CAD unless otherwise stated. Source: Company Reports, Thomson Reuters
Nova Leap Health Corp. (TSXV:NLH)
Nova Leap Health Corp. (TSXV:NLH) is a North American provider of personal home care and support services. The Company is focused on acquiring and organically growing home healthcare companies. Nova Leap’s post-acquisition growth strategy is to increase annual revenue per location through a combination of increased employee investment, including training, focused sales and marketing efforts, billing rate growth and expansion of geographical coverage.
- The Home Care Providers industry is one of the fastest-growing healthcare verticals in Canada and the United States. Home care saves patients billions of dollars every year by treating them in their own homes as opposed to hospital settings. Industry growth is driven by secular trends such as an aging population, shift towards chronic disease management, focus on cost-effective treatment options in the private and public pay space as well as growing physician acceptance of home healthcare.
- The U.S. Home Healthcare market is worth US$89.2B, of which the NonMedical Home Care bucket accounts for 6.1%, with a size of US$5.4B. The marketplace is highly fragmented, with more than 90% of industry establishments comprising of sole proprietorships. Furthermore, no industry player accounts for more than ~5% of industry revenue. As an accretive M&Adriven pure play in the space, Nova Leap offers investors a compelling story with an attractive risk/reward profile for the next 12-24 months.
- Nova Leap Health continues to execute on its corporate M&A strategy. The Company has focused on acquiring and organically growing Private Pay NonMedical and Skilled Home Care companies, and the recent deal announcements illustrate that management continues to find investment opportunities at attractive takeout multiples. Nova Leap is beginning to realize economies of scale by successfully integrating within its growth-by-acquisition model and expects to be profitable on a consolidated basis by year-end.
Financial Highlights & Valuation
- On a relative valuation basis, Nova Leap Health stock currently trades at 1.4x forward EV/Sales, a discount to 1.6x commanded by its industry peers. Management has guided to a FY2018 annual revenue run rate of US$14M – US$15M. With its two most recent acquisition announcements, the Company should exceed US$15M. We opine that at current levels, NLH offers equity investors a compelling growth story in the next 12-24 months, given the disciplined M&A platform, efficient capital allocation and strong execution by an experienced management team.
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