Solid Performance across all Parameters:Propel Funeral Partners Ltd (ASX: PFP) is the second largest provider of death care services in Australia and New Zealand. The Company owns funeral homes, cemeteries, crematoria and related assets in Queensland, New South Wales, Victoria, Tasmania, South Australia, Western Australia and New Zealand. PFP’s services and products across the death care range can be tailored or personalised as per religious or ethnic preference. The Company operates 50 freehold and 53 leasehold locations, including 23 crematoria and 7 cemeteries.

The company has recently posted strong performance across all parameters after successful Initial public offer (IPO) event. Topline grew by 83.9% to $38.9 Mn in 1H FY18 from $21.2 Mn in 1H FY17 due to 2.0% volume growth in funerals operation & favourable sales mix. On segment-wise result, Funeral operations’ sales surged up by 89.3% YoY, Cemetery and Memorial Gardens’ sales was up by 20.3% YoY and other trading revenue rose to 224.3% YoY in the first half of the year. Besides this, the number of funeral increased by 85.2% from 2729 in 1HFY17 to 5053 in 1HFY18 on the back of completing the Seasons Funerals’ acquisition during the same period and impact of six acquisitions completed in FY17. However, gross profit margin edged lower from 70.5% in 1HFY17 to 69.4% in 1HFY18, due to financial and operating metrics of acquisition completed during the period. Pro-forma operating EBITDA increased 78.5% from $6.1 Mn in 1HFY17 to $11.0 Mn in 1H FY18 because of higher sales. After settling the acquisitions, PFP will have a net cash position of $21 Mn for funding purposes. Apart from this, the company believes that funeral industry has a brighter outlook on the back of projected increase in death rate of about 1.4% during 2016-2025 and then 2.2% from 2025 to 2050, which will ensure the topline growth in future. The company has not declared interim dividends but intends to pay dividend payout ratio in the range of 75% to 85% of pro-forma distributable earnings after completion of the year.

Taking into consideration the first half year’s solid performance and expected impact from the acquisition of the Brindley Group and Norwood Park during second half of the year, the group expects to be on the front foot. The group’s FY18 Pro Forma Operating EBITDA is expected to witness a 15% rise. PFP stock has dipped by about 5.4% in last one month and is a “Speculative Buy” at the current market price of $3.16


Robust Growth Trajectory (Source: Company Report)

 
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