The Funeral Services Space - InvoCare Ltd and Propel Funeral Partners Ltd

  • Dec 21, 2018 AEDT
  • Team Kalkine
The Funeral Services Space - InvoCare Ltd and Propel Funeral Partners Ltd

INVOCARE LIMITED (ASX: IVC) is into the business of providing quality funeral, cemetery and related products & services. The company is leading the market in Asia-Pacific funeral and related service sectors. It has 290 funeral locations and 16 cemeteries and crematoria operational under its scope of business. These are primarily located in Australia, New Zealand, and Singapore. The company works with a unique vision of excelling at honouring, celebrating and memorizing a loved one through its services. They support the clients during critical times of their lives. This provider of funerals, burials and cremations, tries to achieve success through operations with the help of compassionate services exceeding expectations.

On the other hand, PROPEL FUNERAL PARTNERS LIMITED (ASX: PFP) was developed and is managed by Propel Investments Pty Limited. The company has an objective to maintain and improve its goodwill and quality of services provided to the customers and it creates value through active portfolio management and disciplined capital allocation. The company owns several assets that include funeral homes, cemeteries, etc. These are located in several parts of Australia, and New Zealand; and thus, PFP has engagement with many partners.

Coming back to InvoCare, IVC as a company is continuously seeking to expand the range of available products and services, to train people and to invest in facilities and community relations. The company specializes in catering to the demands of the multicultural and religious communities around the world. Propel is focused in the investment strategy of acquisition of valuable assets that operate in Australia and New Zealand in the death care industry. The company will continue to consider organic expansion opportunities such as selectively identifying potential sites in new locations and expanding (and/or refurbishing) existing locations. The portfolio of Propel also includes land and buildings adjacent to existing funeral homes that can potentially provide expansion opportunities (including the brownfield ones).

For InvoCare, the half year result for June 2018 demonstrate a rise of 1.8% in revenue from continuing operations with 4% growth in operating sales revenue while net profit was down 50%. The group also subsequently notified that funeral case volume for H1 has been bleak and the prevailing situation might impact full year results.

For FY18 financial and operating review, Propel reported pro forma numbers to highlight, revenue of $80,869,000 (an increase of 75.5% on the prior year), operating EBITDA of $21,478,000 (an increase of 75.0% on the prior year), and operating NPAT of $12,318,000 (an increase of 124.7% on the prior year). Thus, this provider of death care services has been developing a strong financial base.

In addition, Propel came up with key market updates during trading hours on December 20, 2018, regarding its future vision of performance going forward. It warned about the continued weakness in funeral market conditions in Australia and still expects its first half FY 2019 operating net profit after tax to be in line with the prior corresponding period profit of $6.27 million. Although, there are no latest updates for InvoCare, however the stock of the company tumbled around 6.5%, which may be on the news update of rival Propel’s profit outlook. Propel has also updated about its notice on Australian Super Pty Ltd to be its initial substantial holder.

The main trend in Australia recently showed that the number of cremations is more than burials as noted by the Funeral department. With the expected growth in demand for death care services in Australia and New Zealand due to rising death volumes on account of population growth and ageing of the ‘baby boomers,’ both the companies are expected to witness some bit of growth while funeral industry has always been on the brink of some volatility; however, Propel seems to be bit resilient when it comes to certain fundamentals, as seen lately.

As at December 21, 2018, the current market price of InvoCare Limited’s stock is $10.29 with a decline of approximately 6.5% noted a day before. The company’s market capitalization stood at $1.13 billion; and the stock has posted a YTD return of -36.09% with a 52-week high of $16.47 and a 52-week low of $10.12. The company is trading at an earnings multiple of 14.6x with an EPS of 0.699 AUD.

On the other hand, Propel Funeral Partners’ stock is trading at a price of $2.490 with a market capitalization of $247.37 million (December 21, 2018, 1 PM AEST). The company’s stock has a YTD return of -26.74%.


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