Well’s proposed takeover of crosstown counterpart CRH Medical would more than double its revenue
The stock: The pandemic—or the markets’ reaction to it, anyway—has been a balm to Well Health Technologies (TSX:WELL). The Vancouver-based company, which offers virtual and in-person health-care services as well as electronic medical records (EMR) storage, has soared more than sevenfold from a low of $1.22 a share last March to more than $9 recently.
The drivers: Regardless of whether global vaccination efforts result in herd immunity from COVID-19, it’s now clear we’re not going back to the admittedly arcane habit of visiting the doctor (usually at great inconvenience), receiving an illegible paper prescription and spending half an hour at the pharmacy while they fill it for every routine ailment. Led by serial entrepreneur Hamed Shahbazi, who took fintech startup Tio Networks to a $302-million payday from PayPal in 2017, Well has steadily added to its offering through acquisitions of smaller clinics and health-tech firms focused on making the patient experience cheaper, easier and more efficient.
But its proposed takeover of another Vancouver-based health-care provider, CRH Medical (TSX:CRH), announced in February, is a big pill to swallow. The addition of the business, which provides gastroenterology and anesthesia services, mostly in the U.S., is expected to more than double Well’s revenue. To finance the deal, Well is getting a nearly $300-million shot in the arm from investors led by Hong Kong billionaire Li Ka-shing.
It’s also worth noting that CRH’s vital signs in the markets over the past year were very different from Well’s, its shares under the weather and range-bound until the recent offer came along. Can Well continue to work its magic with ever larger acquisitions, or will this one break investors’ fever for its stock?
Word on the street: Buying CRH is “positive in the way it changes Well’s profile,” explains Colin Healey, an analyst with Haywood Securities. The deal will make what is still a money-losing startup profitable, or at least reduce its losses. Granted, the bigger Well gets, the harder it will be to deliver the percentage growth it has in recent years, but the company still has about $80 million in cash to make further acquisitions without diluting its share value. “I’m still super positive on it,” Healey says. “It’s one of my top picks.”
NOTEWORTHY: As of March 1, the former Empire Industries (TSXV:EIL) has rebranded as Dynamic Technologies Group, now trading under the symbol DTG, reflecting a change in the company’s strategic focus toward its Port Coquitlam–based business designing proprietary amusement park rides. Dynamic is also known for designing structures and fabricating components for large astronomical observatories.