Mad Paws Holdings Ltd: Trading on Track as Sector Interest Grows
Mad Paws Holdings Ltd
Trading on track as sector interest grows
Madd Paws Holdings Ltd (ASX:MPA) has announced a trading update to November 2021 with rolling 12-months GMV (including both marketplace and subscription revenue) +92% on the PCP. Looking at our numbers and allowing for the seasonally strong December month this guidance is in-line with our current estimates. While COVID- related lockdowns impacted marketplace bookings for the first four months of FY22, a strong recovery is evident from November with GMV in the last week of November +~50% on both FY21 and FY20. Travel from the origin is a key driver of marketplace bookings/GMV and should only improve going into CY22 cycling a weak base with a larger customer pool. Interest and appreciation of the sector’s growth potential continues to increase, evidenced by recent capital raisings from Lyka Pet ($6.5m in July) and Pet Circle ($125m in December). Increased pet ownership and the humanisation of pets are cited by both companies as a driver of growth opportunities, and MPA is no different. While MPA continues to consolidate (Waggly Club and Sash Beds), it is also a potential acquisition target given its growing customer base.
Business model
MPA operates an online marketplace which connects service provides with pet owners, predominantly for dog hosting, dog sitting and dog visits. MPA charges a 7% booking fee to “customers” and a 20% commission on the total service fee (less the booking fee) for service providers. The group operates a negative working capital model, with payment received pre- service provision and released post-service provision. The group has had ~117k unique customers since launch in 2015 and is looking to utilise this growing database to offer other pet services such as food delivery and insurance to capture a greater share of a conservatively estimated $4.0b addressable market.
Interest in the pet care sector continues to grow
The thematics of increased pet ownership, the humanisation of pets and vertical extension opportunities to a loyal customer base has seen continued activity in the sector over recent months. Lyka Pet successfully raised $6.5m in a Series A raise in July to build more manufacturing capacity for its fresh dog food offering, while Pet Circle completed a $125m Series C raise in December valuing the group at over A$1bn. MPA is well positioned in this space to participate in consolidation while also being a potential target, with customer numbers as at September 2021 ~117k. On the consolidation front MPA has added “Sash Beds” to its offering with a $275k purchase finalised this month.
Valuation of $0.35/share or $76m market cap
Our DCF valuation for MPA remains $0.35/share diluted for all in-the-money options. The combination of a growing customer pool, growing penetration of this pool for new products/services, and lower longer-term customer acquisition costs drives this valuation and offers significant upside for both penetration rates and new products/services. Since our initiation, Has the currency to be the top dog, on 4-Nov, the domestic peer group has declined an average 8% and US peer Rover 5%. MPA continues to trade at a 30% discount to closest peer Airtasker (ASX:ART) and a 40% discount to US peer Rover (NASDAQ:ROVR).
- 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...