#Propel Funeral Partners ltd

[kalkine]

Why investors look for stocks that have wide geographical reach?

Why investors look for stocks that have wide geographical reach?

Diversification in terms of investing means spreading your risks across different assets or asset classes or across geographies while values can be achieved from different zones. If you are an equity investor, one strategy to invest is to look beyond equities that target business in just one country. There are stocks that are either listed in other countries too or have business points in…

[bearishmitch]

Major Reinvestment Program Gives Invocare New Lease on Life

New competitors are unlikely to breach the firm's wide economic moat

Shares in funeral services provider Invocare Ltd (IVC AU) have been punished during the past six months. We believe the market's myopic concerns are misplaced, offering an opportunity to invest in this attractively priced wide-moat company. Invocare's moat is sourced from a combination of scale and intangible brand assets, which insulate it from competitors such as recently listed Propel Funeral Partners, while preventing similar challenges to those recently faced by Dignity in the United Kingdom. Management is investing heavily, refurbishing funeral homes, cutting costs, and bringing IT systems up to speed, all of which will further strengthen its already dominant position. We are attracted to the resilience of the industry, and an ageing population drives an acceleration in demand for at least the next two decades. In addition to concerns about an uptick in competition, we believe the market also underappreciates the value of the prepaid funeral business, which provides a low-cost source of funding.

Key Takeaways 

The domestic funeral market is sufficiently fragmented for both Invocare and newly listed Propel Funeral Partners to continue gaining share for the foreseeable future without stepping on each other's toes. We estimate both firms will account for 60% of the domestic market by fiscal 2022, but Invocare will maintain its superior position, given its leading scale, market segmentation, and brand strength. 

While the market is concerned Invocare may cede market share or experience pricing pressure, as has been in the case with Dignity in the U.K., we believe this is an unlikely scenario, given fundamental differences between the two businesses, accordingly the multiple de-rating is misplaced. 

The prepaid funeral business is attractive, as the funds are invested in a diversified portfolio and over the long term should comfortably outperform inflation, with the benefit retained by the company. 

We believe the market's fears have created an opportunity to invest in a high-quality stock at a discount. We raise our fair value estimate by AUD 1.50 to AUD 17.00 per share to reflect the increasingly valuable prepaid funeral business and more bullish market share assumptions.

We project high-single-digit EPS growth for the next five years. Invocare is amid an unpreceded reinvestment program, which should facilitate market share gains and a continuation of 3%-4% price increases per year, supporting revenue growth of around 7% per year. We forecast almost 150 basis points of EBITDA margin expansion to 28% by fiscal 2022, reflecting increased scale and cost cuts.   

Analyst: Daniel Ragonese

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Mitch recommends source https://goo.gl/jL56GL

[kalkine]

How well are the Funeral Care Operators Positioned in Australian Market? With the emerging trend towards ‘celebrating the life’ as the purpose of funerals, businesses in the sector are gaining some traction lately.

[kalkine]

Propel Funeral Partners Announces Regarding Acquisition of the Funeral Business of Newhaven Funerals Propel Funeral Partners Limited announced it has executed a conditional sale agreement to acquire the funeral business, crematorium and memorial gardens of Newhaven Funerals Pty Ltd (Vendor) in North Queensland (Newhaven North Queensland) for approximately $4.1 million1 .