Medica PLC (LON:MGP) is undergoing a transformation according to house broker Liberum, which should pave the way for a re-rating of the teleradiology specialist.
The broker has a buy stance and raised target of 220p on the shares compared to a price of 152p currently and says the market has yet to appreciate the work underway to boost sales and earnings.
That includes growing capacity in the UK to take advantage of 10-12% market growth, investing in its tech platform to drive margin gains and expanding into new regions/services to improve revenue quality.
Liberum expects Medica, listed on the main market, to deliver 22% earnings growth in each of the next five years, while the quality of these earnings is also improving as the proportion of work with the NHS has dropped to 70% from 100%.
Earlier this week, Medica also bought RadMD for £15mln funded by a £16.1mln equity raise, a move that gives an entry to a US$1bn sector that is about 3.5 times the size of Medica’s core UK teleradiology market.
The RadMD platform is high quality with 90% repeat business and an order-book that equates to four times 2020 revenues, added Liberum.
“With UK sales starting to recover from COVID, the Future Tech platform making good progress and most importantly, this week’s RadMD acquisition (3-5% accretive) bringing Medica into the clinical trials market, we believe management is delivering a transformation.”
Shares were trading at 152p today.