Where to find pet care inventory in the middle of a prime city
Even before the pandemic sparked the panic puppy buying phenomenon, the number of Australian pet owners was on the rise due to the strong demographic trend towards single-occupant households.
With mutts, moggies, and other random beasts moving children up the family hierarchy, spending on pet care has increased even more sharply.
According to a survey by Animal Medicines Australia, two-thirds of Australian households owned a pet in 2019, with 29 million animals registered (more than the two-legged population of 25 million).
Unsurprisingly, dogs made up 5.1 million of this national menagerie, followed by cats (at 3.8 million). Canberra-based households are more likely to own dogs – both for officials with big cats – while South Australians are more likely to own cats (eat crows).
Fish may be low reward pets – albeit low maintenance – but we still own 11.3 million. And 2% of households owned pets “like horses, goats, cows, alpacas and hermit crabs”.
Pet care is a promising growth area
According to data cited by recently-listed Mad Paws (ASX: MPA), Australians spend $ 13 billion on their pets annually. This includes $ 3.9 billion in food, $ 2.6 billion in veterinary care and $ 1.4 billion in products.
While supermarket shelves are teeming with gourmet pet delicacies, investors aren’t really spoiled for choice when it comes to listed exhibitions in one of the most promising growth sectors.
Founded by Glen Richards of Shark Tank fame, Greencross Vets was listed in 2007 and then merged with retail chain Petbarn in 2013. The union was far from dazzling and the company was bought out by the giant TPG private equity for $ 675 million.
With just over 100 clinics, National Veterinary Care was then bought out by another private teammate at the end of 2019, at a practical premium of 56% equivalent to a market valuation of $ 251 million.
Mad Paws listed in late March this year, after raising $ 12 million in an oversubscribed initial public offering (IPO).
The Airtasker of the pet world, Mad Paws facilitates third party services such as dog walking, pet sitting and grooming. The company generates its income by cutting the ticket up to 20% from the provider and 7% from the owner of the animal.
The company is also getting into the online subscription pet food delivery game; with a start-up company called Dinner Bowl. We guess this makes them more like the Uber Eats of the pet world.
Veterinary clinics benefit from boom in companion animals and growing agricultural sector
But if your columnist has a stock of pets, it’s Apiam Animal Health (ASX: AHX), which runs a chain of rural and urban vets.
Under these conditions, Apiam is exposed both to the boom in companion animals and to the agricultural sector (currently buoyant).
Apiam was listed in December 2015, raising $ 40 million to $ 1 each. The initial funds were used to finance a sale by a seller and to buy 12 veterinary practices (the company already had an interest in five of them).
Now the only ASX-listed veterinary game, Apiam, based in Bendigo, Victoria, provides service at 46 clinics in all states except South Australia, as well as on-farm advice to hog, dairy and feedlot producers.
With a workforce of 150 veterinarians, Apiam serves 35% of the country’s pork and dairy industries and more than half of the beef cattle feedlot industry.
It’s not just James Herriot stuff that gets the hang of it. The company also derives revenue from products such as drugs, vaccines, dietary supplements and premium pig semen from its genetic labs.
Meanwhile, Apiam’s pet billings were around 14% of revenue at the time of listing to around 25% now.
Apiam reports a six-month “bumper” on the companion animal side, aided by the opening of two clinics with its joint venture partner Petstock. The clinics in Torquay North and Shepparton are capitalizing on the trend of sea / tree changes caused by the pandemic.
The Shepparton clinic includes an isolation room for contagious diseases like parvovirus (no, not Covid), a dental room and a flow room with the ability to return a test in 14 minutes.
Try to find this quality of service in a public hospital!
Apiam posted revenue of $ 30.3 million in the March quarter, down 2.8% from a year ago, mainly due to Covid reasons. However, the gross margin edged up 1.5% to $ 17.5 million, which wasn’t bad considering “unusually high” purchases by farmers in the previous quarter at the start of the pandemic.
Perhaps a better guide, cumulative revenue for the year was $ 91.6 million, up 4.7%, with unaudited gross margin up 9.7% to $ 52 million.
Apiam still faces challenges related to Covid in the cattle and hog feedlot segments, but the dominant message is that all is calm on the farm.
In mid-April, Apiam raised $ 6 million in a placement at $ 0.80 apiece. Curiously, Petstock took a 16% stake, which is sure to stir up tongues on the rally sites.
Financial performance in a cottage industry
Getting back to Mad Paws, the company’s prospectus shows a loss of $ 3.17 million in 2019-2020, on revenue of just under $ 2 million. The year before, Mad Paws lost $ 3.77 million on earnings of $ 1.57 million.
The gross value of goods increased to $ 10.2 million from $ 8.6 million previously.
After closing at $ 0.24 in its early stages – a 20% premium – shares of Mad Paws are hiding just below the issue price of $ 0.20, for a market cap of $ 33 million.
Mad Paws is on the bones of growth: In the year 2019-2020, the company executed 180,000 transactions, with 400,000 owners and 19,000 vendors signed up to the platform.
But the company must demonstrate scale in a sector of the cottage industry. As with the recently listed Airtasker (ASX: ART), Mad Paws needs to make sure the vendor and end customer don’t migrate offline and cut the middleman once they get to know each other.
Pet Insurance Offers
On a positive note, Mad Paws recognized the potential of the pet insurance industry. Pet coverage hasn’t been popular compared to the United States, but Mad Paws estimates the local market is worth $ 745 million (as measured by premiums) and growing strongly.
Mad Paws plans to offer an insurance product under its own brand, in conjunction with Pacific Insurance and AI Insurance. Indeed, the white label arrangement means that Mad Paws pockets a commission and leaves the underwriting risks (and rewards) to the experts.
In your columnist’s own experience with a sickly dog, insurance avoids the need for embarrassing family discussions when there is a need for $ 5,000 bladder calculus surgery (this has happened two times. times in fact and seeing you ask, the patient is doing well).
But it’s expensive, especially when it’s beyond humanoid health insurance premiums.
Listed private health insurance companies Medibank Private (ASX: MPL) and NIB Holdings (ASX: NHF) offer pet insurance, but the company isn’t even a line in their accounts.
Given the pressures on the fund to keep healthy human clients, this may be likely to change as passionate owners go out of their way to ensure the health of their furry friends – and hermit crabs. .