WCG
Wellcare Health Plans Inc
Healthcare
10/03/2019
Presented
| Date | 09/26/2019 |
| Price | $259.38 |
| Market Cap | $13.05B |
| Ent Value | $16.83B |
| P/E Ratio | 24.99x |
| Book Value | $91.50 |
| Div Yield | 0% |
| Shares O/S | 50.31M |
| Ave Daily Vol | 458,283 |
| Short Int | 9.69% |
Current
| Price | $349.92 |
| Market Cap | $17.61B |
| WellCare Health Plans, Inc. engages in the provision of government-sponsored managed care services through Medicaid, Medicare Advantage, and Medicare Prescription Drug Plans to families, children, seniors, and individuals with complex medical needs. It operates through the following segments: Medicaid Health Plans, Medicare Health Plans, and Medicare PDPs. The Medicaid Health Plans segment includes plans for beneficiaries of TANF, SSI and ABD programs and other state-based programs that are not part of the Medicaid program, such as Children's Health Insurance Program and MLTC. The Medicare Health Plans segment provides a comprehensive array of Part C and Part D benefits to Medicare eligible persons, through the MA plans. The Medicare Prescription Drug Plans (PDP) segment serves as a plan sponsor offering stand-alone Medicare Part D PDP plans to Medicare-eligible beneficiaries through this segment. The company was founded in May 2002 and is headquartered in Tampa, FL. |
Publicly traded companies mentioned herein: Centene Corp (CNC), Molina Healthcare Inc (MOH), WellCare Health Plans Inc (WCG)
Highlights
On March 27, 2019, Centene Corp (CNC) and WellCare Health Plans Inc (WCG) announced a merger in which CNC will acquire WCG in a cash and stock transaction for $305.39 per share based on CNC’s day prior closing stock price for a total EV of $17.3B. This is a merger arbitrage situation in which the presenter owns the spread with a long position in WCG (the target) and a short position in CNC (the acquirer). However, he notes that the spread isn’t exceptionally wide, and his position is based on a bullish view on the proforma company, which will be the largest Medicaid/Medicare company (~$100B in revenue). While he does appreciate concern regarding political risk, he considers the valuation underpriced based on his 2021 proforma EPS estimate of $5.54 and 2022 estimate of $6.48. CNC trades at ~$43 per share, which is ~8x his 2021 estimate and a massive discount to its historical mid- to high-teens forward P/E multiple. As the combined company grows EPS, he expects the multiple to expand to ~14x, implying a price target of ~$80 once consensus 2021 estimates reach his estimates.
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