SURGERY AHEAD FOR
ADVANCED HEALTH?
Since hitting 27 3/8 in mid-October, the stock of Advanced Health
(ADVH) has gone downhill, closing at 12 on June 2. Heavy short-selling
of the stock--partly because of problems at rival
doctor's-office-management companies such as FPA Medical
Management and MedPartners--has hammered the stock. But the
shorts' happy days may be numbered, say some pros.
Management may break up the company to unlock the value of its two
operations, say some pros. The word is that the Advanced Health
Technologies unit, which sells information technology to doctors and
hospitals, may be spun off to shareholders.
Valued separately, the unit--expected to contribute $15 million in
revenues this year and about $25 million in 1999--would command a
price of 7 a share, figures Louis Riley III, who heads Riley Capital
Research. ''Investors have overlooked this fast-growing and highly
profitable unit,'' he says. One of its components: online software that
automates prescription writing at the point of care.
Riley says the medical-practice unit should turn in $120 million in
revenues, up from 1997's $49.5 million. He values the unit at 27 a
share, based on 11 million shares outstanding. Combining that with
almost $4 a share in cash, Riley figures the stock is worth 38.
Even without a spin-off, analysts see earnings of $1.05 a share this
year and $1.46 in 1999, vs. 1997's 91 cents. Chairman Jon Edelson
says the company will takes steps to unlock the value of its technology,
which the market has failed to recognize.
BY GENE G. MARCIAL |
