Propel Funeral Partners Limited
PFP Details
Another lucrative Acquisition: Propel Funeral Partners Limited’s (ASX: PFP) stock surged up 0.67 per cent on June 07, 2018 as the company has executed the conditional sale agreement to acquire the funeral business, crematorium and memorial gardens of Newhaven Funerals in North Queensland for approximately $4.1 million. This transaction includes $0.3 million of the deferred cash consideration payable if certain financial milestones are achieved during a 3-year period and excludes completion adjustments and transaction costs. As part of the proposed transaction, the group will acquire a circa 8-acre property in Mackay on which there are a crematorium, a chapel, and memorial gardens. It will lease the property in Cannonvale. The Vendor will continue to own and operate its funeral and crematoria operations in South East Queensland and the group will have a license to use the “Newhaven Funerals” brand in North Queensland. This deal is subject to satisfaction of customary conditions such as consents to the assignment of key contracts and confirmatory due diligence and is expected to be completed in Q1 FY19. Further, this deal will help to expand its geographic footprint in Queensland as they do not have any operation in Mackay, the Whitsundays or their surrounding areas. The proposed acquisition will be funded from its cash reserve and it is expected that the transaction will be accretive to its earnings in year one. On the other hand, the group has a strong balance sheet, with net cash of $52.0 million and no senior debt. Propel intends to explore raising a senior debt facility during 2018.
Geographic Footprints (Source: Company Reports)
On the other hand, PFP stock has been added to All Ordinaries, effective from March 19, 2018 as per March 2018 Quarterly Rebalance of the S&P/ASX Indices. Meanwhile, PFP stock has fallen 5.08 per cent in the past three months as on June 06, 2018. PFP is expected to benefit from several acquisitions in forthcoming years. Hence, we give a “Speculative Buy” recommendation on the stock at the current market price of $ 3.010.
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PFP Daily Chart (Source: Thomson Reuters)
InvoCare Limited
IVC Details
Attractive Acquisition while there are performance related challenges: InvoCare Limited (ASX: IVC) has recently announced the acquisition of Southern Highlands Funerals based in Moss Vale, New South Wales. The objective of this deal is not only entering the Moss Vale district but also using its operating platform which will help to roll out the company’s national brands (which is Simplicity & White Lady Funerals) in the Southern Highlands region. Southern Highlands Funerals is currently performing circa 100 funeral services per annum and generates revenue of approximately $0.7 million per annum. Under the agreement, the company will purchase its assets which include the freehold property, brand, plant and equipment, motor vehicles and prepaid contracts. Further, the management stated that this is the opportunity for InvoCare to both acquire a well-established brand and fully equipped funeral facility in Moss Vale which offers an opportunity for future expansion into the broader Southern Highlands region. The group will continue to review acquisition opportunity in the core and new regional markets, which will provide the inorganic growth in long-run. However, the group has revised its full-year guidance wherein operating EBITDA will be in-line with 2017 financials and operating EPS will witness a low single digit decline.
Geographic Footprints (Source: Company Reports)
On the other hand, IVC disclosed to ASX that one of its directors, Martin Alistair John Earp had a direct and indirect interest in the Company and acquired 1,532 ordinary shares via On-market Purchase at an issue price of $13.0 per share. Moreover, Richard Hugh Davis who had a direct interest in the company disposed of 40,000 ordinary shares through the on-market sale. Meanwhile, Macquarie Group Limited and its controlled bodies corporate ceased to be a substantial holder of IVC since 22 May 2018. IVC stock was down by 22.6 per cent in the past six months and inclined by 16.74 per cent in the past one month as at June 06, 2018. As of now, we maintain our “Expensive” recommendation on the stock at the current market price of $ 13.280, considering the trading volatility and EPS growth for full year.
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IVC Daily Chart (Source: Thomson Reuters)
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