Proactive Investors - WELL Health (TSX:WELL) Technologies Corp is well-positioned to benefit from the two-tiered healthcare system developing in Canada, Stifel GMP analysts said.
In a note to clients, the analysts wrote that Canada's provincial premiers had moved to accept a 10-year, $196 billion Federal funding proposal initially presented last week that would add $46 billion in new funds and include immediate, 2023 top-ups in an effort to manage surgery and diagnostics backlogs.
“Premiers will now prioritize the new funding within provincial systems, as long as it meets the essence of the plan's focus of family health teams (primary care), healthcare workers, surgery and diagnostics, mental health and substance abuse, and digital health,” the analysts wrote.
The analysts wrote that they continue to see WELL as one of the few ways to gain exposure to the new funding, along with opening access to a two-tiered healthcare system.
“WELL is already to benefit from immediate top-ups, applicable to diagnostics and imaging (MyHealth), but is also well positioned strategically with a digital health focus,” they wrote.
They also noted the Ontario government’s announcement for greater access and support for private clinics helped illustrate that a two-tiered healthcare system was developing in Canada, where WELL Technologies could play a meaningful role.
Recent mergers and acquisitions by large companies illustrated the value of healthcare assets as well, where take-out multiples ranged from 3x to 9x EV/sales, the analysts highlighted.
“The health-tech sector has been volatile with frothy valuation in the early days of the pandemic setting back substantially. However, WELL is differentiated among most peers with a profitable and diversified network of healthcare assets that is digitally enabled,” the analysts wrote.
As such, Stifel’s analysts awarded the stock a ‘Buy’ rating with a price target of C$13.50. WELL Technologies is currently trading at about C$4.08.
The analysts concluded: “There remains variability on how the healthcare system evolves in Canada, but we see a strong long-term case to be investing in WELL at only 1.7x 2023 sales versus peers at 3x.”