The Motley Fool

This small cap just revealed a record Q1 trading update

Propel Funeral Partners Ltd (ASX: PFP) is the second largest funeral operator in Australia and just gave the market its trading update for the first quarter of FY19.

It reported that it achieved record revenue of $24 million, which was up approximately 20% on the prior corresponding period. It also achieved record funeral volumes.

The operating earnings before interest, tax, depreciation and amortisation (EBITDA) margin was “above 26%”, which was consistent with FY18. Like for like (LFL) average revenue per funeral was up compared to FY18 and it was within the long-term target growth range of between 2% to 4% per annum.

Propel also reported that cash conversion remained strong at around 100% and its observable market share has remained stable.

For the first half of FY19 Propel is facing a strong prior corresponding period (PCP) in 2017 due to a severe flu season last year, this year there is a below trend number of funerals due to a benign flu season in 2018. Assuming this continues, LFL volumes will be down for the first half, however Propel said that historical experience suggests a rebound in funeral volumes in 2019.

Management remain on the lookout for additional acquisitions to add to the ones it has already made during the past year.

The balance sheet is apparently in good shape to fund those acquisitions with a current net cash position of $15 million and a new $50 million senior debt facility.

Propel said that it’s still targeting a dividend payout ratio of between 75% to 85%.

Foolish takeaway

Propel is one of my favourite small cap ideas because of the long-term organic and inorganic growth it can achieve. Acquisitions will be a major driver of inorganic growth.

Organic growth will likely be driven by the fact that death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050.

Propel is currently trading at under 20x FY19’s estimated earnings with a grossed-up dividend yield of 3.4%. I believe it could be a decent long-term buy at the current price.

Another hot growth share I’ve got my eye on is this ASX tech stock which doubled its profit in FY18.

Motley Fool Australia Issues Rare "Double Down" Buy Alert

Scott Phillips has stumbled upon a little-owned stock he believes could be one of the greatest discoveries of his 25 years as a professional investor.


This is your chance to get in early on of what could prove to be a very special investment recommendation. Think about how many investing trends you've missed out on, even though you knew they were going to be big. Don't let that happen again. This is your chance to get in early.

Simply click here to get started and access our secure sign-up page.

Motley Fool contributor Tristan Harrison owns shares of Propel Funeral Partners Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Scott Phillips.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now