GCIOptima Health to debut on AIM following demerger from Marlowe
An interesting new stock - Optima Health - is coming to AIM on 26th Sept after it's been spun out (in specie) by Marlowe.
No fresh capital is being raised for this UK provider of occupational health services who reported March FY24 revenue and adjusted EBITDA of £110.9mn (-4% vs FY23 £115.3m) and £18.0m (-16% FY23 £21.0m) respectively.
Currently, Optima supports around 170 large clients (contract size of >£100k pa) and 2,000 in total across both the public and private sectors. The UK occupational health market is forecast to grow to £1.4bn in 2028 from £1.3bn in 2023, representing a 3% CAGR - with the Board's aim to ultimately capture a 25% share vs 9% today.
However, in H2'23 a major longstanding customer unfortunately gave notice - alongside another contract, which was significantly reduced in size by a 2nd large public sector client who decided to take some of its occupational health services in-house.
Hence March FY25 revenue is expected to be lower than in FY24. No FY25 estimates are provided today - albeit I would guess we're talking of c. £105m and £15m in sales and EBITDA, which if put on a 7x-8x EV/EBITDA multiple on top of c. £20m of net debt, would hypothetically generate a market cap of between £85m-£100m.
In comparison, Marlowe originally acquired Optima Health in Jan'22 for £135m.
That said, according to today's demerger RNS from Marlowe, the exec team "will be subscribing for new shares at an equity valuation of £225m", which to me would suggest Optima Health's gross margins are high (say >75%).
This implies that if the company was ever taken over by a trade buyer, then instead it might go for as much as 2.3x EV/sales or 16x EB/EBITDA, even for a currently declining business.
Let's see what house broker Panmure Liberum comes up with later this month.
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