It’s no secret that the Australian economy is shifting. After years of growth reliant on the booming resources sector investors are looking elsewhere for the next wave of opportunity. Here at Blue Lake Invest we are no strangers to this concept having pushed the dairy agenda recently. But I know there is more to life than milk and cheese. Not much more, but a little bit more.
One of the emerging opportunities is health care, or more specifically to this post fertility. Some might not feel comfortable to the monetization of fertility, including the enhanced technology in chromosome screening, and the touted gender selection. But if it makes you feel any better the subject of today’s post boasts 83% women in management positions. Without the stats on hand, this is probably ASX leading, or near the top regardless.
The rationale here is pretty simple. Australians are beginning to have children later in life which for some will include IVF treatments. Additionally we are seeing more same sex couples starting families and having children. The demand on fertility clinics is consequently increasing.
The numbers for the last couple of years are scarce, but back in 2011, 30 years after IVF treatments commenced in Australia showed that Australian parents were undertaking 41,000 IVF cycles, which eventuated in 10,000 babies. In terms of what these figures mean, these 10,000 IVF babies made up 3% of all newborns here in Australia. This number is expected to have increased since.
Now I hinted to this company a few paragraphs above, but you are probably wondering who is making the money here? Well the answer is Monash IVF (ASX:MVF). Well they make a lot of it.
Unfortunately, we could not get stock quote ASX: MVF this time. have made a few acquisitions over recent years making them a significant player in fertility market. MVF operate 9 fertility clinic brands, or 22 clinics across Australia. Victoria makes up a significant proportion of their network and reach, while MVF are well placed to capitalise on the fast population growth on the Eastern Seaboard.
The group operate a range of services centred on fertility which I won’t even attempt to go into, but the bottom line is the fertility industry is booming. Now if like me you have a stake in BAL or A2M, all that baby formula? Well this is where it starts. It’s kind of like an obscure vertical integration strategy.
The numbers? Well they are doing pretty good too. MVF have been listed on the ASX for about 18 months, and the share price is above the low points of the September crash, but still discounted from the previous highs. Revenue has increased by 9.6% from the last financial year, however this in part has been driven by acquisitions.
The good news here is the profit and dividends. The group has just reported a profit of $23.3m up 3% from last year. As a result the group has paid out dividends to the value of 6.95c for the year, or a yield of about 4.9%.
The commentary around these numbers is quite positive. The share price drop is a result of numbers being below forecast, attributed to slower than expected market growth and delayed expansion. But despite this the group has been able to increase market share and access new markets. So the outlook remains bright.
This stock has found its way onto my watch list as a potential high growth opportunity. The important metric to watch will be performance against forecast. I don’t anticipate a major price jump in the imminent future however I suspect MVF will enjoy continued profit growth.