MGP - Small cap report 25/3/20193 Aug 2019 15:55
Medica (LON:MGP)
Share price: 127.8p (+2%)
No. of shares: 111 million
Market cap: £142 million
Final Preliminary Results
This company provides "teleradiology", i.e. radiologists working remotely to analyse scans.
This type of service is useful out-of-hours or when no radiologist is available locally, and is part of a wider trend of outsourcing by NHS trusts who need more services at lower cost. See my comments last year on the stock.
It now has Australian and New Zealand radiologists working for UK clients, and its total number of radiologists increased from 306 to 362 by the end of 2018.
These results show revenues in line with expectations and net debt eliminated.
Outlook - 2019 has started well. Revenue growth is expected "to remain at double digit levels similar to 2018" (revenue growth in 2018 was 15.6%).
Analysis - The company makes excellent gross margins of c. 50% and has achieved a fine operating margin of 25% in 2019.
The balance sheet is a bit thin when you strip out intangibles but it looks healthy enough, assuming continued strong cash flows from operations.
The company raised money at 135p two years ago for its IPO. Shares then rallied as high as 235p before returning to the current level.
My view - this looks genuinely interesting to me, the more I look into it. It has plans to open more international centres, and I can't see any immediate obstacles on the growth runway.
The long-term strategy is to provide a more diverse range of services, with customers from the private sector in addition to its traditional customer base. I would imagine that its proposition will only become more attractive to customers as it grows.
The rating isn't too expensive, the cash flow generation looks good, and the business model makes sense to me. Sending scans to someone who is available to review them immediately, wherever they are in the world, is a good idea! And perhaps Medica's scale can give it a sustainable competitive advantage.
Definitely worth looking into in more detail, in my view.
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https://www.stockopedia.com/content/small-cap-value-report-mon-25-march-2019-aeo-sal-spsy-mgp-bry-ldsg-461398/
LOOKS GOOD TO ME
Hope this helps
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