Home health care set to boom as coronavirus affects aged care facilities
The home health care market is already doing very well helped along by the increase in our aging populations. But now with coronavirus concerns it is making more sense for those in need to have home help rather than risk crowded locations including aged care facilities. For example, in Australia the government is now considering putting aged care facilities into lockdown due to the recent surge in coronavirus case.
This plays into the strengths of a Canadian home health care acquirer Nova Leap Health Corp. (TSXV: NLH). This is because Nova Leap focuses on care in the client’s comfort of their own home.
A brief background on Nova Leap Health Corp.
Nova Leap is a home health care services company that was created to assemble a portfolio of home care and home health care companies that have the potential to be leaders in their particular geographical market. Nova Leap plans to grow through a combination of continued acquisitions and organic growth, with a focus on North America.
Nova Leap not only acquires home care services companies, they also manage and build companies that provide top-level support to their clients. By providing home health care service the Company is able to provide skilled aftercare including nursing, home physical therapy, wound care, and health care including for dementia clients. In providing a home care service alternative Nova Leap is able to provide clients with ongoing assistance with activities of daily living which may include services from simple errands to housekeeping, transportation, and meal preparation. Nova Leap’s focus is to give their clients independence and quality of life.
Nova Leap Health Corp. is growing fast in the fast growing sector of home health care in North America
A sound business model
Nova Leap follows a sound business model. Their process includes finding quality home health care companies (a strong reputation/brand) with a geographical focus on the US and Canada, a positive EBITDA , and ideally a 10 year history with US$1 million plus in revenues. Nova Leap is growing fast, which means that as the business scales up margins are improving and profitability is just around the corner.
US dementia patients forecast to grow significantly as the US baby boomers age
One in 10 people (10%) aged 65 and older has Alzheimer’s dementia. As North America ages the number of dementia cases is increasing. Often the best and most affordable way to care for our dementia patients is home health care in a friendly and familiar environment.
The chart below shows the number of US people aged 65 and older that are forecast to get dementia. In 2020 the figure is 5.8 million, by 2030 8.4 million, by 2040 11.6 million, and by 2050 13.8 million.
Source: Nova Leap company presentation February 2020
Nova Leap are well funded having recently been 1.5x oversubscribed
On December 5, 2019 Nova Leap announced a non-brokered private placement of convertible debentures. The offering was for C$2 million with the following terms: “The Debentures will mature five (5) years after the issue date (the “Maturity Date”) and will accrue interest at the rate of 8.0% per annum, payable semi-annually. At the holders’ option, the Debentures may be converted into common shares of Nova Leap at any time and from time to time, up to the Maturity Date, at a conversion price of CAD$0.52 per common share (the “Conversion Price”).”
President & CEO of Nova Leap, Chris Dobbin, stated: “We continue to receive quality acquisition opportunities on a regular basis……We recently announced the best financial results in our Company’s history, and we are determined to continue along that trajectory. This funding will allow us to act on acquisition opportunities should we chose, as well as pursue our plans to expand organically into new territories.”
Following the December 5 offering Nova Leap announced on December 20: “Due to oversubscribed demand, the non-brokered private placement of Debentures will now consist of maximum gross proceeds of CAD$3 million.”
The over-subscription is a very positive endorsement towards Nova Leap from investors.
2019 annual financial results to be released by mid-March
Nova Leap has had a brilliant past year with several major acquisitions resulting in a record leap in EBITDA. Nova Leap will present 2019 full year results at the 2020 Spring Investor Summit in NYC on March 25 and 26, 2020. The Spring Investor Summit will take place at the Essex House, featuring 160 companies and over 1,000 institutional and retail investors.
The Company has already publicly stated they will release “record 2019 results“. The results will be released by mid-March, 2020.
Nova Leap is already well geographically diversified with operations in 5 different U.S. states: Vermont, New Hampshire, Massachusetts, Rhode Island and Oklahoma as well as Nova Scotia, Canada. Their business model of acquiring smaller but profitable home health care companies is starting to bring rewards.
The home health care sector (including dementia care) is set to grow substantially over the next decade. Added to this is the recent coronavirus concerns which may lead to more clients choosing home health care rather than taking the risk of an aged care facility.
With an oversubscribed C$3 million debenture raise now closed and 2019 results out in mid-March, Nova Leap will shortly be in the spotlight of over 1,000 institutional and retail investors.
At the current market cap of just C$24 million investors can still get in early before the institutional investors. Judging by management’s strong performance in 2019, 2020 will again be another big year for Nova Leap and should see the stock price move higher.
Matthew Bohlsen is a Senior Editor for InvestorIntel.com. With a Graduate Diploma in Applied Finance and Investment, and a Graduate Diploma in Financial Planning. He ... <Read more about Matthew Bohlsen>