TSX Healthcare Stock a Must Own For 2020?

Viemed Healthcare (TSX:VMD) (NASDAQ:VMD) seems perfectly positioned to benefit from the trends caused by the COVID-19 pandemic

Capital Ideas Media | May 25, 2020 | SmallCapPower: Capital Ideas Media Publisher Mark Bunting wrote: There are some companies that suddenly and unexpectedly seem perfectly positioned to benefit from the trends caused by the COVID-19 pandemic. Viemed Healthcare, Inc. (TSX:VMD) (NASDAQ:VMD) is one of them.

(Originally published on Capital Ideas Media on April 14, 2020)

We first featured this company in early March of 2019 when the stock was trading around $7 a share. It promptly ran to close to $11. After the battering most stocks received during the pandemic panic, VMD fell to the $7 range and is now back to nearly $9 [Editor’s Note: VMD stock closed at C$11.69 on May 22].

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Beacon Securities, which has not conducted investing banking with VMD within the last 12
months, has increased its revenue forecast for the company and raised the price target on the stock to $12.50 from $9, giving it about 40% upside, while maintaining a “buy” rating.

This is Beacon’s description of Viemed:

Viemed provides home respiratory services to patients struggling with various respiratory diseases including COPD and various neuromuscular diseases. With almost 25 million Americans reporting that they have been diagnosed with COPD, the country’s third largest killer behind cancer and congestive heart failure, Viemed provides a solution for people who suffer from this debilitating disease.

Beacon analyst Doug Cooper says Viemed is “right in the eye of the storm” of the pandemic and is benefiting from its ventilator and general pulmonary expertise.

Here are excerpts from Cooper’s report:

• The situation has created a perfect storm for the company where it is benefiting on a number of different levels:
• There are a limited number of hospital and ICU beds in the United States and there is a clear movement to discharge as many as possible to free up those beds for incoming COVID patients. This is leading to more chronic patients who will be treated at home through such VMD-offered products as NIVs and oxygen.
• CMS/Medicare has relaxed prior bureaucratic procedures and is making it easier for clinicians to prescribe respiratory related device and equipment and the flexibility for more patients to manage their treatments at the home. While predominately NIVs currently, we also believe it could include a surge in oxygen sales for Viemed.
• VMD recently started engaging with the VA (Veterans Hospital). Given the environment, help to such patients, who have COPD, is also being accelerated to keep them out of the hospital.
• VMD started its tele-health pilot called Patient Engagement Program (PEP). Given the recent environment, such a project has been accelerated and the company is looking for opportunities to partner with other tele-health platforms.
• We believe it very likely that CMS will, at a minimum, postpone or perhaps even cancel the competitive bidding program for NIV, which was to start Jan 1, 2021. This, in particular, had caused us to delay our full-year (FY)2021 forecast given the potential for reimbursement cuts. Given CMS has MUCH bigger issues to deal with and respiratory companies such as VMD have proven to be so essential, we believe the probability of a material rate-cut has diminished and as such, we have confidence in extending our forecast to FY2021.
• The drivers noted above have resulted in Viemed recently raising its Q1/2020 revenue guidance to ~$23.8 million from $22.3 million.
• The new guidance represents 31% year-over-year (y/y) and 11% sequential growth.
• The increased revenue is not only being driven by an increase in patients but also by the sale of medical equipment to hospitals and state governments.
• Such deepening of relationships with hospitals around the country, both existing ones and establishing new ones, are very significant as they represent future referrals to be tapped as VMD opens-up new locations around the country.
• Given the recent increase in its Q1 guidance and our belief that such momentum will continue, we are raising our 2020 forecast to $101 million/$27.8 million (from $97m/$25.2m).
• We are also introducing 2021 estimates that include 20% patient growth with revenue/EBITDA of $120.7 million/$33.3 million.
• Based on our 2021 forecast and a weakened Canadian dollar, the stock is trading at 5.6x EBITDA. Traditionally, healthcare service companies trade in range of 8-12x. We note ResMed (NYSE:RMD), a ventilator manufacturer, trades at 16x 2021 estimates.
• VMD should trade at a minimum of 10x given its growth and market position.

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