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Investors looking for a Canadian health-care play driven by new technologies are examining Well Health Technologies Corp., a Vancouver-based small-cap with a high-profile investor and mission to change how doctors work.

Shares of TSX Venture Exchange-listed Well Health, which own 19 family-doctor clinics in B.C. and a growing electronic medical records (EMR) business, have risen by about 230 per cent so far this year to a market value of around $142-million, or about $1.50 a share. The stock has pulled back from its all-time high of $1.87 on July 12 as the recent euphoria wears off.

“There is greater awareness to the story,” GMP Securities analyst Justin Keywood says of the stock’s recent run-up. “Investors are starting to recognize what this business could become.”

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All four analysts that cover Well Health have a “buy” recommendation and average target price of $1.11. Some analysts are reviewing their estimates in light of the stock’s recent surge, which came after increased media attention and the closing of a $10.5-million bought-deal private placement in June, which was upsized from $8-million.

The offer attracted new institutional investors but it’s the existing stake owned by billionaire Li Ka-shing that appeals to many investors. Hong Kong’s richest man owns just less than 11 per cent of Well Health, while his venture capital firm, Horizon Ventures – which was also an early backer of Facebook Inc. and Spotify Technology SA – has a roughly 7-per-cent interest, according to the company.

His combined stake is alongside the 18-per-cent holding by Well Health’s founder, chairman and chief executive officer Hamed Shahbazi, an entrepreneur known for selling his previous company Tio Networks Corp. to PayPal Holdings Inc. for $304-million in 2017.

Mr. Keywood of GMP, whose firm led the latest financing, believes investors are pricing in “somewhat of a premium for management,” given the track record, but also for the company’s “unique business model and opportunity” to further digitalize health care in Canada.

By his estimates, Well Health has about 6 per cent of the EMR market in Canada, behind Loblaw Cos. Ltd.’s 27-per-cent stake and Telus Corp.’s Telus Health division at about 44 per cent.

Mr. Keywood expects Well Health to build or acquire at least three more clinic assets in the next year “to expand its clinical portfolio and steady cash flow.” He also sees the company acquiring more EMR companies “in a pursuit for above double-digit market share.”

The company’s EMR acquisitions to date include the $2.55-million purchase of NerdEMR Services Ltd.; software platform OSCARprn, which stands for “Open Source Clinical Application Resource” for $876,000; and most recently its $10.75-million acquisition of Kela Atlantic Inc., doing business as KAI Innovations. All three acquisitions provide EMR services through the OSCAR framework. The company also has an investment in Silicon Valley technology startup Circle Medical.

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Some of the current risks for the company include too much concentration in B.C., changes in health-care regulations and a doctor shortage. In a recent note, Mr. Keywood said the company has a diverse portfolio of clinics and that its public company structure may offer “unique compensation incentives” for its doctors.

In an interview, Mr. Shahbazi considers Well Health to be “organizers and innovators, not disruptors” of the health-care system. He says the company’s objective is to address the “extreme fragmentation” in Canada’s health-care system by consolidating health-care assets both in clinics and digital health.

“We are building two portfolios, but they aren’t disparate businesses. They have enormous tie-ins,” Mr. Shahbazi says.

His plan is to keep acquiring clinics, including an expansion into specialty clinics, and more digital health properties. Additional technologies may include areas such as telemedicine and online patient booking. “There is so much to do to provide a complete platform,” Mr. Shahbazi says.

While the company is growing, it’s still losing money. Well Health reported revenue of $7.4-million in the first quarter ended March 31, up from $1.9-million for the first quarter last year, ended April 30, driven by acquisitions. Its net loss was $1.4-million or 2 cents per share versus a loss of $266,600 or nil per share in the year-ago quarter. Analysts are predicting the company will be cash-flow positive in 2020. Mr. Shahbazi says the company is “comfortable” with that forecast, but wouldn’t provide guidance.

Peter Hodson, founder and head of research at independent firm 5i Research Inc., believes the company has earned the increased attention and valuation in recent months.

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While the stock has surged, “a pop shouldn’t scare you off,” Mr. Hodson says. “It means other people like the company, did their research and are willing to put money into it.”

While the momentum has slowed somewhat, “from a small-cap point of view, it has a lot of the qualities an investor is looking for,” Mr. Hodson says, including a market ripe for consolidation, a technologically outdated health-care system in need of updating, a high-profile investor and a large insider ownership.

“The expectations are high for a reason,” he says.

That said, Mr. Hodson recommends investors treat it as a longer-term play. “This is not a company you want to own for three-to-six months. This is a five-year plan,” Mr. Hodson says.

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