Mad Paws Holdings Ltd - Strong Recovery in ABV, More to Come
Mad Paws Holdings Ltd
Strong recovery in ABV, more to come
Mad Paws Holdings Ltd (ASX:MPA) has released its Q3 FY22 4C cash flow report together with a trading update. The key take-outs from the release centre around the marketplace and integration plans for recently acquired Pet Chemist. From a marketplace perspective, booking numbers increased ~13% on the previous corresponding period (pcp) despite the adverse timing of Easter. Peak Easter bookings in FY22 against FY21 are said to be up 70% (two weeks later in FY22). Just as importantly we estimate the Average Booking Value (ABV) in Q3 FY22 to be 33% higher than the PCP at ~$142, driven by a combination of longer-duration travel and increased sitter charges. New customer additions continue at a rate of ~15k/quarter or 20% of the existing base. From an integration perspective, management is focused on introducing its ~600k-strong database to the Pet Chemist customers, cross branding where possible and building a single-view data base across the business. The recovery in average marketplace fees is greater than expected, and we have increased our GMV/revenue assumptions accordingly, resulting in a 1% revenue increase and 5%-6% EPS increases over the forecast period. There is no change to the ecommerce/subscription assumptions.
Business model
MPA began and still operates an on-line marketplace connecting service provides with pet owners, predominantly for dog hosting, dog sitting and dog visits. MPA charges a 9% booking fee to “customers” and a 20% commission on the total service fee (less the booking fee) for service providers. The group has had ~148k unique customers since launch in 2015 and is looking to utilise this growing customer base to offer other pet services which now includes subscription food delivery (Dinnerbowl), treat subscriptions (Waggly), accessories (Sash Beds) and on-line healthcare/prescriptions (Pet Chemist) to capture a greater share of a conservatively estimated $8.0b addressable market.
Significant recovery in average booking fee underway
By our calculations the average booking value for the March quarter, even without peak Easter bookings was ~$142, up 33% on the $106 12-months prior and equal to our estimate for the seasonally strong December quarter FY22. This is above our estimates, and we have taken the opportunity to increase medium-term assumptions accordingly. A combination of returning/longer-duration travel and higher sitter rates is driving this value higher and there remains significant upside as travel (particularly international) continues to return to more normalised levels. As a reminder the September FY19 ABV was $161 or 13% higher than today. Our FY25 ABV assumption is now $156.
Valuation remains to $0.43/share despite EPS increase
Our DCF valuation for MPA remains $0.43/share despite a $0.02/share positive impact from higher average ABV assumptions over the medium-term. The offset is the impact of increasing our RFR assumptions from 2% to 3%. While there are a number of assumptions driving this valuation, the keys are Pet Chemist achieving the mid-point of earnout revenue targets, a higher gross margin for its OTC/retail business, continued new customer growth for the marketplace (~15% of the existing base each year) and lower long-term customer acquisition costs.
- Unlock research summaries
- Follow top, independent analysts
- Receive personalised alerts
- Access Analytics, Events and more
Join 55,000+ investors, including top global asset managers overseeing $13+ trillion.
Upgrade later to our paid plans for full-access.
- Loading...