Propel Funeral Partners Stock Rising

Propel Funeral Partners, the funeral home, cremation, and cemetery company that serves Australia and New Zealand is seeing their stock continue to rise since their initial public offering (IPO) in November.  According to an article in the Motley Fool from December 27, 2017, the stock has moved from an IPO price of AUS $2.70 to a price of AUS $3.30 and in checking today, to a price of AUS $3.44.  That’s an approximate price increase of 27% in the first month of being a public company.

The Motley Fool article also notes that Propel Funeral Partners is not waiting to make a splash in the death care market down under.  They have announced the purchase of the Brindley Group for AUS $15.38 million (about US $ 11.8M).  The Brindley Group conducts about 1350 services annually and generates revenue of about AUS $11 million (about US $8.5 million) annually.  The article also says that this acquisition will increase Propel’s annual funeral volume by 13%.

The article goes on to say that death care services are expected to grow about 1.4% annually in Australia and over 1% in New Zealand and that Propel Funeral Partners has an estimated market share of 4.1% in Australia and 6.7% in New Zealand.  Interestingly enough, only SCI has a market share higher than that among American death care providers.

According to the Propel Funeral Partners web-site they operate 80 locations in Australia and New Zealand, including 19 crematoria and 5 cemeteries.

Funeral Director Daily take:  I find it fascinating to continue to see that the “roll-up” model that was perfected by Robert Waltrip and Service Corporation International in the 1960’s continues to be the growth vehicle of choice in the death care industry.  Nobody has created a franchise model that creates a “brand” that can be distinguished on a national level like so many other businesses.  It is interesting to note, however, that some of the foreign funeral companies, such as Australia’s InvoCare, Great Britain’s Dignity, and now Propel Funeral Partners are moving into the realm of a national brand.  You might argue that SCI’s Dignity Memorial brand and Neptune Society brand is working toward that end in the USA, though.

The “roll-up” model has its ebbs and flows depending on the state of the industry at any given time.  Once SCI proved it going into the 1980’s there were all kinds of imitators — such as Arlington Corporation and public companies such as Equity Partners and Loewen Group.  As these companies grew they either sold off or self-destructed creating opportunities for new companies to flourish.  They also showed a path for regional consolidators to flourish.  It is my opinion that this is a great time for the consolidators as, I believe, that the problems with funeral home staffing may open up many acquisition candidates simply because so many family operators have no one following the footsteps.

I enjoy crunching data also and the acquisition of the Brindley Group by Propel and the announcements made by Motley Fool give rise to these numbers.

  • If the 1350 services raises Propel’s funeral volume by 13%, then they are doing about 10,384 services today at about 80 locations which leaves a location volume average case number at about 129.  These are not large funeral homes.
  • Secondly, if the Brindley Group acquisition was at AUS $15.38 million and the Brindley Group annual revenue is at about AUS $11 million, then the sale price was only for about 1.39 times revenue.  To me, that does not seem real expensive.

It is also interesting to note that the newest public companies in the industry are promising dividends to shareholders – probably to attract those shareholders in the first place.  Park Lawn Corporation of Toronto, Canada, already pays a dividend and Propel Funeral Partners, in their  prospectus touts a potential dividend at about a 3.5% rate.  For investors, a chance at growth with a steady stream of cash is very desirable.  You can read the Propel Funeral Partners prospectus here.

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