Why Soul Patts is a major shareholder of National Veterinary Care Ltd

There aren’t many businesses or people on the ASX that have as a successful or illustrious investment record over the last thirty years as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

Over the past 15 years Soul Patts has delivered total shareholder returns of 12.8% per annum, outperforming the All Ords Accumulation Index by 3.9% per annum.

Soul Patts invests for the long-term and does it well, which is why I think it’s worth taking note of any major investments that the conglomerate makes.

Obviously TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW) and Australian Pharmaceutical Industries Ltd (ASX: API) and a few others are key holdings, but Soul Patts is a major shareholder of several other smaller businesses as well.

In its last substantial holder update, Soul Patts informed the ASX that it increased its ownership of National Veterinary Care Ltd (ASX: NVL) from 6.5% to 7.78%.

National Veterinary Care will soon be the second largest veterinary clinic group in Australia and New Zealand. It recently announced it will acquire four more clinics for a total cost of $3.6 million which will add annual revenue of $4.5 million and $0.79 million and earnings before interest and tax (EBIT).

I like Soul Patts and National Veterinary Care, which is why I’m a shareholder of both companies.

National Veterinary Care has quite defensive earnings because of how regularly pets are taken to the vet. Around two thirds of cats and three quarters of dogs go to the vet annually. This creates good recurring revenue for veterinary clinics.

The pet population is steadily growing alongside the human population, meaning there’s more potential pet patients for National Vet Care to treat. The number of cats and dogs in Australia has grown by 7% and 3% respectively. If the human and pet population continues to grow there could be more organic growth in store.

Foolish takeaway

National Vet Care could grow into a substantial business if it reaches the number of veterinary clinics that Greencross Limited (ASX: GXL) has now. National Vet Care is currently trading at 33x FY17’s earnings, that sounds expensive but in a couple of years I think today’s price will appear cheap.

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Motley Fool contributor Tristan Harrison owns shares of Greencross Limited, NATVETCARE FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Greencross Limited, TPG Telecom Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of NATVETCARE FPO. The Motley Fool Australia has recommended Australian Pharmaceutical Industries Limited and Brickworks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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