Criterion: Listed pet minder gives investors paws for thought
Experts
According to Animal Medicines Australia, households spent an average $3218 on their dogs and $1715 on their cats in 2022. Throw in a few budgies and terrapins and the pet care market was worth $33 billion – and surely more now given the ravages of inflation.
The stats show the unwinding of the ‘pandemic puppy’ phenomenon did little to quell spending on our furry – or scaled – friends.
“People are trying to save on anything they can, except for on their family and pets are part of their family now,” says Mad Paws (ASX:MPA) CEO Justus Hammer says.
Mad Paws operates two divisions – an Airtasker-style marketplace to connect owners with a rota of 60,000 pet minders and an ecommerce arm that includes Pet Chemist, Waggle (subscription treats) and Sash Beds.
At this time of year, owners are mulling whether to send their pets to a kennel or deploy a one-on-one home minder.
Peak season kennel fees have soared and collection times can be inconvenient, while many nervous animals would prefer a staycation while their annoying owners hoof it elsewhere.
Hammer points out minder fees vary considerably, depending on the provider’s experience and services offered.
“You can find something for every wallet and that’s where the marketplace works well. Fees range from $35 per night to $120, depending on the sitter’s qualifications and the services you need.”
Profitability wise, the company is a tale of two divisions.
The marketplace generated revenue of $7.8 million in the year to June 30, with earnings before interest, tax depreciation and amortisation (ebitda) of $2.6 million.
This revenue is the company’s $27 clip of every $100 earned by the minder.
Ecommerce chalked up revenue of $20 million, for an ebitda loss of $600,000.
In the September quarter, the ecommerce arm broke even, while the marketplace made $800,000.
Both sides of the business are growing at about 20% per annum.
If Mad Paws feels Airtasker-ish, there’s a reason in that Airtasker (ASX:ART) founder Tim Fung was an investor in a Series A funding round in 2018 and joined the board.
Hammer returned the favour as an investor in – and advisor to – Airtasker.
Both companies have struck mass media ad-for-scrip contra deals. In February, Mad Paws entered a deal with Seven West Media, by which the Seven Network owners took a 10.8% Mad Paws stake in return for $1.25 million of cash and $4 million of free advertising.
Launched in September, the TV campaign resulted in a “significant uptake in demand”.
Locally, Mad Paws competes with a cottage industry of dog walkers, the biggest rival being the private platform Paw Shake.
Hammer reckons a better comparison is Rover Group , the leading minding platform in the US and some parts of Europe.
In February private equity group Blackstone collared the then Nasdaq-listed Rover for US$2.3 billion.
Rover managed more than US$200 million of revenue last year.
Mad Paws has a market cap of $27 million, having lost two-thirds of its value since listing in March 2021 at 20 cents per share.
Meanwhile the ranks of the ASX-listed pet ownership plays have dwindled, with two vet groups – Greencross Vets and National Veterinary Care – privatised.
That leaves the $74 million market cap Apiam Animal Health (ASX:AHX) which started out as a farm animal play but has since expanded into the more lucrative companion vet market.
With 73 clinics, Apiam last year reported $205 million of revenue, up 6% and a $7.2 million net profit (up 12%). Companion and mixed animals (such as horses) contributed 78% of the turnover.
Apiam also paid a 2 cents-per-share dividend, equating to a yield of 4.8%.
Both Apiam and Mad Paws have elicited recent takeover interest, which is paws for thought indeed.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision.