Recent Financial Performance: In 2010, the company generated revenues of $417 mm, adjusted EBITDA of $90 mm. (MedQuist has a $225 mm credit facility consisting of $200 mm Term Loan and $25 mm revolver L+550 with a 1.75% Libor Floor $85 mm in sub notes 13% in cash or 12% cash/2% PIK.) This is why we think that MEDH is misunderstood by the market.) (A note: How many investors do you think spent time trying to understand these transactions? We doubt many. which it does not currently own to bring its ownership in MedQuist Inc. MedQuist Holdings commenced an exchange offer for all outstanding shares of MedQuist Inc.The new common stock was listed on the Nasdaq Global Market under the symbol “MEDH.” On December 31, 2010, it sold its non-strategic Patient Financial Services business for $14.8 million, of which $13.5 million was paid in cash and the balance was in the form of a note.During the three months ended December 31, 2010, the company sold its 32% interest in A-Life Medical, Inc., for $23.6 million, of which $19.5 million was paid in cash and $4.1 million was paid into escrow.In connection with its re-domiciliation, it adjusted the number of our shares outstanding through a one-for-4.5 share reverse share split. and re-domiciled from a British Virgin Islands company to a Delaware corporation. On January 27, CBaySystems Holdings changed its name to MedQuist Holdings Inc.This private exchange was completed on February 11 and increased CBay’s ownership in MedQuist Inc. Certain of MedQuist Inc.’s non-controlling stockholders entered into an exchange agreement with Cbay whereby they were issued 4.8 million shares of MEDH common stock in exchange for their 4.8 million shares of MedQuist Inc. ![]() CBay received $122.6 million of this special dividend and used $104.1 million to extinguish a 6% Convertible Notes and $3.7 million of other debt. used the proceeds to repay $80.0 million outstanding under an old credit facility, $13.6 million of subordinated notes, and to pay a $176.5 million special dividend to its stockholders. issued $85.0 million of 13% senior sub notes due 2016 and $200.0 million of a term loan, under a $225.0 million credit facility. ![]() Spheris was the second-largest US medical transcription service provider by revenue at the time.īeginning in October of 2010, Cbay/MedQuist undertook a series of transactions: In April 2010, CBay and MedQuist separately acquired certain assets of Spheris in a transaction conducted under Section 363 of the Bankruptcy Code. Private Capital Group, LLC, invested $124.0 million to acquire a majority interest in Cbay the company used the proceeds of this investment to purchase a 69.5% interest in MedQuist Inc. MedQuist Holdings Background: The company began operations in 1998, and until 2011 was domiciled in the British Virgin Islands under the name CbaySystems Holding Limited. ValueNotes (a market research firm) estimates that the in-house medical transcription market was 67% of the overall market in 2009, and projects the percentage of outsourced production of medical transcription will grow from 33% in 2009 to 38% in 2014. Industry Overview: The market for outsourced clinical documentation was estimated to be $5.4 billion in 2009 and is expected to grow 8.2% per annum over the next five years to $8.0 billion in 2014. 30, 2010, the average tenure of its top 50 customers was over five years, and approximately 98% of its revenue was from recurring services. ![]() MedQuist’s customers include more than 2,400 hospitals, clinics, and physician practices in the US, including 40% of hospitals with more than 500 licensed beds. It is the largest provider by revenue of clinical documentation solutions based on the physician narrative in the US.ĭuring Q1-2011, 72% of medical records was processed using ASR (automated speech recognition) technology and 41% was produced offshore. Can MEDH eventually trade at TRCR’s PE multiple? Why not? MedQuist generates 4x TRCR's revenues and we believe that over time, its valuation will exceed TRCR's, implying (to us) that the stock could double from $12.Ĭompany Description: MedQuist Holdings provides clinical documentation to hospitals and clinics by converting physicians’ dictation of patient interactions into an electronic record. We expect that to change as the stock gets seasoned and receives more sell-side coverage. ![]() In our view, MEDH is misunderstood and very much under-the-radar. Nuance (NUAN) - which is also a competitor, though more diversified than MEDH and TRCR - is trading at a PE ratio of 16x. A direct competitor, Transcend ( TRCR), trades at a PE ratio of 18x. Its stock is trading at a PE ratio of 9x. Situation Summary: After completing a series of transactions which include a balance sheet recapitalization, paying a large special dividend, divestitures, stock exchanges, reverse stock split and a (poorly received) IPO, MedQuist Holdings ( OTCPK:MEDH) began trading on the Nasdaq on February 4.
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