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Is Monash IVF Group Ltd (ASX:MVF) losing market share?

Recent trading updates from both Monash IVF Group Ltd (ASX:MVF) and Virtus Health Ltd (ASX:VRT) show they are losing market share to new competitors.

After posting stellar 2016FY results, Monash IVF Group Ltd (ASX:MVF) latest trading update may well be causing concerns for shareholders.

monash-ivf-2016-report Source: Monash IVF 2016 results presentation

As we can see from the graph above, IVF treatments are somewhat cyclical in nature. After posting excellent growth last period we would again expect a pullback in Q1 2017.

monash-ivf-agm-update-2016 Source: Trading update for Monash IVF 24/11/2016

As expected the pullback occurred, but rather than beating or at least matching the market, Monash IVF Ltd has suffered an even worse decline.

The more worrying information is that the decline got worse in part due to a new competitor entering into the Victorian market. (Note Victoria is one of Monash’s largest markets.)

This threat was confirmed by the another ASX listed IVF provider Virtus Health Ltd (ASX:VRT)

virtus-health-ltd-2016-agm Source: Vitrus Health Company announcement 9/11/2016

Comments

With the average age of mothers in Australia 37 years and rising, perhaps only the aged care sector has a more robust demographic tailwinds than IVF providers.

While the tailwinds are a plus and unlikely to abate in the near future, they would also act as a strong incentive for new entrants. Unfortunately the barriers for new entrants are not particularly high and have come through already established hospital providers such a Primary Health Care Limited (ASX: PRY).

While new entrants are currently skewed towards providing a cheaper service I believe the biggest risk to current market operators is scientific advances which could reshape the industry overnight.

Tips for New Investors

Understanding a company’s economic moat (or lack of) is one of the most important lessons a new investor can master.

Warren Buffet coined the term economic moat and refers to a company’s competitive advantage over other market participants. This maybe a price advantage due to cheaper raw materials or a patented process allowing the company to produce at a significantly cheaper price than its competitors.

Disclosure:
Please Note: None of the above should be considered investment advice. These are my own opinions based on a number of years market experience. Please do your own research and consult a qualified financial advisor if you wish to invest.

Nick Scali Limited (ASX:NCK) upgrades profits again!

The last 4 years have seen record profits for furniture retailer Nick Scali Limited (ASX:NCK) and this looks set to continue.

It is hard not to like a company that continues to under promise and over deliver. You tend to find companies that do so have a large percentage of their share being held by management and Nick Scali Limited (ASX:NCK) is no different.

Here’s how the good new was announced to investors.

nick-profit

For long term shareholders of Nick Scali this upgrade will come as no surprise with the last four years (and from the latest trading update it looks set to be five) Nick Scali has achieved record profits.

History

As mentioned above the last 4 years have seen record results. Last financial year (15/16) saw sales revenue increase by 30.4% to $203 million, and incredible same store sales growth of 11.1%.

These excellent numbers came through continue selective store openings and increased investment in a targeted marketing. 2016 also saw the establishment of its Western Australian operations. While overall cost of sales increased, operating expenses decreased as a percentage of sales from 44.3% to 41.3%.

Such cost efficiency arose from favourable lease renewals along with economies of scale as the company grew. Importantly for the company and investors gross margin remained at a health 60.8% despite the decline in the Australian Dollar through the period.

Comments

It is hard to be critical of a company that continues to produce outstanding results. While other retailers have struggled in the slowing Western Australian economy Nick Scali’s new stores have continued to perform above expectations. It is not hard to believe that its proposed expansion plans into New Zealand for 2018 will be anything less than a success.

Points for New investors

While Nick Scali has performed incredibly over the last four years this does not mean it can or will continue on forever. As the US returns its interest rates to more normal levels this will present challenges to Nick Scali for the cost of their furniture which is produced over seas. Also as Nick Scali grow economies of scale it is now enjoying will start to diminish.

Having said all of that it would be a brave investor to bet against the retailing skill of the Scali family.

http://www.nickscali.com.au/

Paragon Care Ltd. (ASX:PGC) can this small cap grow into a blue chip?

It has been an extraordinary couple of years for this small health care company but can it keep going?

Source: https://www.google.com/finance

About Paragon Care

Over the past few years Paragon Care has progressively acquired businesses in the healthcare sector to become a leading provider of medical equipment, devices and consumables for the Australian and New Zealand healthcare market.

Paragon has targeted high growth markets driven by Australia’s ageing population, rising consumer expectations and increasing government spending.

Paragon operates in a highly fragmented industry, characterised by a high proportion of smaller, privately owned businesses which has allowed it to acquire 13 businesses over the last 7 years at so far reasonable prices.

Paragon aims to differentiate itself from other suppliers by increasing scale aims to significantly reduce the administrative burden experienced by hospitals and other health care providers when procuring items.

Paragons latest results

paragon-results

Latest Trading Update

paragon-tradoing-update

Conclusion

Simple extrapolation of the last 9 months and inclusion of the latest trading update for the full financial year has Paragon sitting on a PE or approximately 13.25 which in my opinion is hardly demanding for a company in a growing market such as health care. There has been concern around changes the medicare subsidizes but any impact will have less an effect on providers of consumable as compared to imaging providers.

So far shareholders have benefited from sensible acquisitions as most investors know roll up companies are only as good as the companies they buy and the price they pay. While Paragon has done well so far that does not guarantee the same will happen in the future and as such investors need to watch and assess each new acquisition carefully.

Tips for New Investors

Small companies embarking on roll up strategies can make great investments if you get in early and they get their acquisitions right . I have learned to be wary of companies that try to expand too quickly and take on too much debt which can cause problems if economic or market conditions impact on their cash flow and intern their ability to service the debt.

Webjet Limited (ASX:WEB) goes into overdrive

Webjet reports a huge rise in EBITA, and looks set to fly even higher over the next 5 years.

With Donald Trump’s election as the next President of the United States of America and the ensuing market turmoil you can be forgiven if you missed the latest market update from Webjet Limited (ASX:WEB) .

Fortunately for investors the market also appears to missed the quality of the announcement with the price falling back to preannouncement levels so lets take a look at what it missed.

webjet-1

For a company which was already growing EBITA by over 30% in the FY2016 that is quite a step up.

webjet-2

So what’s the story? What is webjet doing so right. Firstly more travel booking is moving online, nothing surprising there but what is interesting is that Webjet is smashing market growth rates.

webject-3

I know what you are thinking that is great but that wont account for such a huge rise in EBITA

Well here’s the kicker their new move in room booking B2C and B2B is also dwarfing industry growth rates.

webjet-4

Comments

Webjet continues to surprise me with its ability to grow profits and maintain margins. Personally when I book travel I rarely find webjet to be the cheapest but their market presence is currently dwarfing other players.

I believe its move into room booking will see the company continue to grow strongly over the next few years. Siting on a current PE of around 30 the price doesn’t look cheap but if you factor in the latest guidance figures the valuation becomes much more reasonable.