The National Veterinary Care Ltd (NVL) IPO is scheduled to list on 11 August 2015 at a price of $1.
Supported by one of the highest rates of pet ownership in the world, Australia’s animal lovers are perhaps an underrepresented source of political clout. If the need for a symbolic political figurehead ever emerged, it would most likely be some sort of dog. Whilst represented in 40 per cent of households, the pooch accounts for over two thirds of expenditures in the nation’s $8billion pet care industry.
One fifth of industry value is delivered by veterinary services. Historically, a fragmented segment of the industry, the 2007 listing of Greencross Vets Ltd as a consolidation vehicle (GXL.ASX) provided impetus for change. Through a series of acquisitions, Greencross has subsequently established a 5 per cent market share and its stock is several times higher than the Initial Public Offer price. Greencross’s more recent corporate manoeuvre was a shift into retailing, via a merger with Petbarn operator, Mammoth Pet Holdings. The transaction saw over half of Greencross’s earnings become attributable to the retail arm.
With over 90 per cent of the veterinary segment, remaining the domain of small clinics, the coming float of National Veterinary Care suggests the door could be open for a second listed player. Incorporated in late 2013, the Company has entered into contracts to acquire complete ownership of 30 veterinary Clinics and a majority interest in 5 Clinics across Australia’s Eastern States.
Proceeds from National Veterinary Care’s coming float are scheduled to fund acquisition of this portfolio, which represents an initial market share of 1.4 per cent. The combined group is forecast to generate a profit for the coming financial year, however the ability of management to deliver value accretive acquisitions is the major source of interest. Supported by ex Greencross personnel, the Company has attracted funding facilities of $29million from ANZ Bank to support expansion.
Primary risks surround its limited operating history, amalgamation issues surrounding the acquired portfolio, reliance on external capital, and lack of immediate dividend. Nonetheless, for investors with a medium term horizon, the outlook appears conducive for capital growth.
Company: National Veterinary Care Ltd
ASX Code: NVL
Shares on Offer: 30million
Listing Price: $1.00
Market Capitalisation: $50.7million
Listing Date: August11th
Author: Simon Herrmann
Aug 06, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.