Hey Folks,I was quite interested in Healthia and so did a deep...

Hey Folks,

I was quite interested in Healthia and so did a deep dive with a Twitter mate (link below). My personal interest is not in the charting, but seeking potential compounders in the health space focused on allied health roll-ups. Niche, I know - but can be super profitable if done well (think Specsavers, Sonic Health, etc).

I'll spare the macro discussion. But from a company perspective, looked great the topline growth figures.


Though digging in to it, was the major reason recent NPAT and EBITDA were even positive.


Meanwhile their acquisitions have also been getting more expensive. While they have a stated target price of 3-4.5xEBTDA, over time this has crept up to as high as x8.2.

... and the acquisitions have actually added little to no value on a pershare basis. They have been raising debt & issuing‘Clinical Class Shares’ which dilutes parent shareholders. The businesses themselves are barely profitable on a realearnings basis. Some of the maths:

o Listed with~63m shares + ~13m net debt (20c/share) on ~70m of revenue (1.10/share) with14.4% clinic class interest

o Currently~90m shares + ~3m rights + ~38.6m net debt (41c/share) on ~110-120m(1.27/share) with 17% clinic class interest

The balance sheet also has a lot of red flags - negative shareholder equity if you impair their goodwill properly. Reckon with their covenants approaching their limits, they'll need to do a cap raise soon:

Management seem to be in it for themselves, not the shareholders. Their performance rights that they give themselves vest on *underlying* earnings, and not diluted earnings; using 2020 as a base which was really low (already +78% in first year, benchmark is +10% for next 3 years, so they'll guarantee most of their performance rights by now).

I'll post the link below for the full deep dive we did on Twitter. GLTAH.