The Propel Funeral Partners Ltd (ASX: PFP) share price is up 3% at the time of writing after announcing some acquisitions.
Propel Funeral Partners is the second largest funeral business in Australia and New Zealand. Today, it announced that it has acquired businesses in New Zealand.
It has acquired the Waikanae Funeral Home and the Kaitawa Crematorium, both of which are located in Waikanae, which is 60km north of Wellington.
Propel Funeral Partners has also acquired Howard & Gannon Funerals, which is located in the coastal city of Napier, which is in the Hawke's Bay region of New Zealand's North Island.
Combined, the businesses conducted around 300 funerals and generated revenue of approximately NZ$2.7 million.
The acquisition includes a freehold funeral home, a leasehold funeral home and the Kaitawa Crematorium, which is a leasehold cremation facility located in the Waikanae Cemetery.
All of this will come at a purchase price of NZ$6.4 million in cash and another NZ$0.69 million in cash if certain financial milestones are achieved within three years. It will be funded from existing cash reserves.
The Managing Director of Propel, Albin Kurti, said "New Zealand is a core market for Propel. The acquisitions announced today will allow us to enter two regions where we don't currently have a presence and they are expected to increase Propel's annual revenue by 2.5%."
The company expects the acquisition to be accretive to earnings in year one.
Why I like Propel shares
As morbid as it sounds, Propel has an ultra-long-term tailwind due to Australia's ageing population. 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. There are very few businesses on the ASX that you could point to where their industries are expected to keep growing for another 30 years. InvoCare Limited (ASX: IVC) should also be a long-term beneficiary.
Market volatility and a temporary reduction in the death rate has seen Propel's share price drop by 13% over the past year. It's currently trading at 21x FY19's estimated earnings with a grossed-up dividend yield of 3.1%.
Whilst Propel won't generate as much growth as a sexy tech share, I think it could be a decent long-term earner for investors willing to take the long view.
