The Propel Funeral Partners Ltd (ASX: PFP) share price could be one to watch this morning after it announced another acquisition.
Propel Funeral Partners, as the name suggests, is a funeral provider. It is the second largest one in Australia and New Zealand behind InvoCare Limited (ASX: IVC).
The acquisition
It's going to buy up to 100% of Manning Great Lakes Memorial Gardens (MGLMG) for up to $4.4 million.
It operates from a single freehold location and conducts an average of 700 cremations and burials per year.
It owns and operates a crematorium, a chapel, memorial gardens and a lawn cemetery from a 15-hectare property in Pampoolah, New South Wales.
MGLMG has been providing cremation and burial services to the region since 1997 and generates revenue of around $1.2 million.
The acquisition will be funded by Propel from existing cash and management believe it will accretive to earnings in year one.
Is Propel a buy?
Before today it was trading at 19x FY19's estimated earnings with a grossed-up dividend yield of 3.5%.
Like its larger peer, Propel is exposed to an ultra-long-term tailwind. 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.
However, in the shorter-term Propel can accelerate its earnings with carefully-selected acquisitions like the one announced today.
Rising interest rates may reduce the attractiveness of ultra-defensive shares like Propel in the next year or two, but it could become one of Australia's blue chips in a decade from now due to the ageing tailwinds as long as competition doesn't hurt funeral prices.
If I didn't already own some shares I'd happily buy a few at this reduced level.
