Timing Seems Right For Alcidion Group

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New research identifies Alcidion Group is attaining scale and becoming profitable at an opportune time for healthcare technology demand.

-Alcidion Group’s expanded offering in a time of industry demand
-Proven business model is scaling and becoming profitable
-Modular architecture point of difference to larger players 
-Expansion opportunities

By Mark Woodruff

Hospitals across the world are facing enormous challenges around waiting times, overcrowding, lack of beds and staff shortages. 

As a result of these circumstances, governments and healthcare operators have been directing funding toward digital transformation for healthcare in the wake of covid, after recognising years of underinvestment in technology.

Petra Capital suggests this trend favours niche digital healthcare solutions provider Alcidion Group ((ALC)), which has broadened its product offerings by reinvestment in the business, as well as via M&A activity. 

The group is now more deeply embedded with existing healthcare institutions, explains the broker, while at the same time providing more touch points with customers, leading to higher-value contract wins.

Alcidion is a leading provider of Clinical Decision Support Software (CDSS) for hospitals in the UK and A&NZ.

Since listing in 2016, the group has expanded its foothold in these countries to now service over 400 hospitals and 87 healthcare organisations, with further growth planned.

Healthcare operators are able to deploy the group’s architecture over the top of legacy technology to extract and repurpose data where needed, or deploy data into new greenfield sites, explain the analysts.

There is a complementary set of modular products that provide real-time analytics for clinicians to make better healthcare decisions at the point of care. 

While the Miya Precision platform is the core offering, the group acquired ExtraMed in April 2021, a UK company specialising in providing National Health service (NHS) trusts with patient flow software. 

The Silverlink Patient Administration System (PAS) was also snapped up in December of 2021, a move that was fundamental to the group’s UK growth, according to Bell Potter, and resulted in an "impressive uptick" for recurring revenue in FY22.

The Miya Precision platform facilitates multiple clinical and operational applications which together provide clinical decision support at the point of care.

Back in February, after Alcidion posted in-line first half results, Canaccord Genuity noted the Silverlink acquisition was beginning to have an impact on total contract value for those hospitals seeking a more comprehensive electronic patient record (EPR) solution. 

Moreover, the Silverlink offering allows Alcidion to more efficiently target Trusts, explains this broker, evidence of which should become increasingly apparent in future reporting. In February, the group had a UK presence in 45 Trusts and was targeting additional customers at a time when the National Health Service was aiming to improve the EPR presence in hospitals.

Petra Capital currently sees strong valuation support for the shares, in a domestically out-of-favour sector where multiples have deflated. 

The broker points out such trends can reverse by citing the example of human resources technology company intelliHR ((IHR)), which was recently acquired at a 300% premium to its pre-bid trading price.

Now is the time to initiate coverage on Alcidion with a Buy rating, assures Petra, because its proven business model is attaining scale and becoming profitable. A 12-month target price of 15c is set.

Expansion opportunities

In early-April, Bell Potter reinitiated coverage of Alcidion with a Speculative Buy rating and 20c target, noting its modular architecture differentiates the group from the larger players in the sector.

Government funding, particularly in Australia and in the UK, is only sufficient to cover a single electronic solution or perhaps just a small number, explain the analysts.

The group may look to the rest of Europe and Canada for expansion opportunities, and although the US provides a much larger addressable market, Bell Potter doesn’t include this country in its valuation given the uncertainty of market entry and pre-existing broad EMR penetration.

Expansion into English speaking countries with a single payer system such as Canada and the Nordics is the most likely, according to the analysts, and both offer significant market opportunities. 

Additional expansion beyond hospitals, into nursing homes or post-acute care areas, also provides a longer-term growth opportunity, suggests Bell Potter.

FNArena's daily monitoring consists of just Buy-rated Bell Potter which actively covers Alcidion Group, and its 20c target suggests 100% upside to the latest share price.

Petra Capital and Canaccord Genuity are not monitored daily. Both have Buy recommendations and an average target of 17.5c.

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