Analyst view: JP Equity Partners on the potential for new tech solutions to disrupt Australian aged care market
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The number of Australian citizens aged over 70 is set to double over the next 15 years.
Most readers would be at least familiar with the regulatory debate surrounding that shift, as policy makers assess how best to manage the strain on government resources.
The reality of those challenges has been made apparent by the Royal Commission into aged care, which illuminated the problems that can arise from a lack of appropriate staffing and resources.
But as with any dominant macroeconomic trend, Australia’s ageing population also provides an opportunity for business to play a role in meeting demand.
To get a professional opinion, Stockhead recently discussed the sector with Nic Brownbill, a director at investment and advisory firm JP Equity Partners.
As an investor in the space, Brownbill has been monitoring key developments in aged care “over the last five to seven years”.
“I think as an investor you’re looking at certain ways to get exposure to key macroeconomic trends, and health and aged care certainly fit in that category,” he said.
One simple way to do that is via an exchange traded fund (ETF). There are “several vehicles” which track a basket of blue-chip Australian healthcare companies, and give simple access to dividend streams and favourable market dynamics.
But in order to get “true exposure” to that trend, Brownbill said investors needed to pay attention to compelling business models at the smaller end of town.
“I see this as an emerging market, particularly where tech innovation is concerned,” Brownbill says.
“The ageing population is placing unprecedented demand on services, and having tech solutions that allow elderly people to live at home independently and deliver services efficiently to them – that’s where the market is moving.”
So, in a relatively new market where companies are trying to prove up their business models and build market traction, what attributes is Brownbill focused on that make a competitor stand out from the pack?
“For me, the top priority is management and your assessment of their ability to execute,” Brownbill said. “What’s their track record? And does their background prove they have the ability to commercialise and scale up tech platforms?
“You’re also looking for evidence of a proven product market fit. are they ready to capture first mover advantage?
“I think if you look at the macro tailwinds forming behind Australia’s aged care sector, there’s a number of players that all rise together as a result. Competition in this space is certainly healthy and I think that will help drive it forward.”
JP Equity is working as the lead manager with aged care tech company Intelicare as it looks to become one of the first new competitors in the space to list on the ASX.
Applying his investment thesis to Intelicare’s prospects, Brownbill pointed to the recruitment of CEO Jason Waller in August last year.
Waller previously ran ASX-listed aerial imaging company Spookfish, which was sold to US company Eagleview Technologies in a $90m deal.
Along with cofounders Greg Leach and Mike Tappenden, Brownbill said the Intelicare management team had demonstrated “a strong track record in founding and growing tech platforms, commercialising them and securing an exit”.
“In terms of the tech itself, the fact it’s reached post-R&D phase is absolutely key here,” Brownbill said.
“The business is already revenue generating, with a number of contracts in place with leading homecare service providers in WA and Victoria.
“So the product is ready to scale, and what excites me is the whole market dynamics are favourable and these guys are positioned to take advantage of it. There’s a significant pipeline of new work across B2B and the consumer side of the business as well.”
For companies that have a tech solution with runs on the board and the opportunity to scale, the ASX still represents the best vehicle within Australian financial markets to access additional capital for scaling up.
However, it also comes with increased disclosure obligations and the potential for volatility if earnings forecasts aren’t met.
But for Brownbill, a critical factor in Intelicare’s strategic decision is the opportunity to strike while the iron is hot in a growing sector.
“The market is ripe right now for someone to enter this space. And the reason we’re seeking an IPO is to go out and capture this market and be the first mover,” he said.
“Someone will occupy this space, and right now Intellicare have the best tech in the market. So if they don’t go out and take advantage of it, other players will.
“Becoming a publicly listed company will provide the capital base to pursue significant growth opportunities. Ageing populations aren’t unique to Australia, they are the reality in most western societies.
“Our business plan is to deploy funds as part of a national rollout. Then once that market has been captured, the focus will turn to global opportunities where we’ve already had strong interest – particularly from the US.”
Brownbill accompanied the Intelicare team on a two-week investor roadshow through the middle of February, which he said received “strong interest across the board”.
The company plans to issue its prospectus in March ahead of an ASX listing before the middle of the year.