MVF - Monash IVF Group

[System]

Monash Group is a leader in the field of fertility services and one of the largest providers of Assisted Reproductive Services (the most significant component of fertility services) in Australia and Malaysia.

Services are provided to patients in Australia through 12 permanent fertility clinics, six satellite clinics, six ultrasound clinics, two specialised diagnostics laboratories and one day hospital. Services are also provided from one permanent fertility clinic in Malaysia.

http://www.monashivfgroup.com.au

 

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... and after only two months since listing, S&P have already promoted MVF into the ASX Top300.

I hadn't heard of them until my Trinity Scan brought the code up a couple of days ago.



Today, I bought some on the pullback.

 

[DeepState]

... and after only two months since listing, S&P have already promoted MVF into the ASX Top300.

I hadn't heard of them until my Trinity Scan brought the code up a couple of days ago.

View attachment 59357

Today, I bought some on the pullback.

Is this a purely technical play for you?

The inclusion was announced on Sep 5 where you can see the stock price jump. This may be the price action that attracted your interest. The actual implementation is scheduled to take effect from Sep 19. Vanguard tracks the ASX 300. They tend to pyramid the trade into the inclusion date and possibly through it in order to contain tracking error whilst allowing for liquidity concerns. There is comfortably enough liquidity as they will need to buy about 2m shares to fully hedge and will likely do this through the reconstitution period. At a guess, they will trade 10% of ADV. However, others will be piggy-backing the trade and there are technical players who will also effectively be doing so, but with a lag. Not too many others track the ASX 300, the bulk index funds tend to track the 200 due to available liquidity. MVF s not being added to the ASX 200 this round.

 

[goccipgp]

MVF has been showing support at 1.60 and resistance at 1.773. Technical buying signal at au stoxline with the target price of 2.071 in six months.

 

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Is this a purely technical play for you?

The inclusion was announced on Sep 5 where you can see the stock price jump. This may be the price action that attracted your interest. The actual implementation is scheduled to take effect from Sep 19. Vanguard tracks the ASX 300. They tend to pyramid the trade into the inclusion date and possibly through it in order to contain tracking error whilst allowing for liquidity concerns. There is comfortably enough liquidity as they will need to buy about 2m shares to fully hedge and will likely do this through the reconstitution period. At a guess, they will trade 10% of ADV. However, others will be piggy-backing the trade and there are technical players who will also effectively be doing so, but with a lag. Not too many others track the ASX 300, the bulk index funds tend to track the 200 due to available liquidity. MVF s not being added to the ASX 200 this round.

Thanks, RY, for the extensive fundamental summary. Much appreciated.

You're right: MVF is mainly a technical play for me. I build my watchlists primarily from technical scans across the entire ASX. When I notice a new code, especially one with promising chart features, I dig a little into their background and/or ask questions. That way I also became aware of their being included in the Top 300.

As a trader, I look for a setup where a stock comes off support, showing a likely turn of momentum. Where appropriate, I wait for a pullback from Primary Resistance, then start buying (under certain conditions) at or near the first higher Low. MVF ticked not only the technical boxes at $1.70, but also many fundamental ones. If the Market continues to like it, I'm happy to stay on for the ride; otherwise I'll stop out and move on.

 

[pixel]

Today's Special Crossing of 3.75M shares at $1.72 suggests that there is still considerable interest in this stock. The price may not be very volatile as yet, but that is a common occurrence, especially when some significant holdings are in play. With Millions of shares at their disposal, it costs peanuts to keep little fish like us from creating any volatility that might push the share price outside their zone of interest.

 

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Following the pullback to 61.8% of the latest trading range, I had been looking for a break and re-test of the Primary Resistance. Have bought more @ $1.75 which I now expect to turn into Support. I'll allow a couple of cents leeway before activating Plan B (= stop out). Plan A has a calculated target of $1.85 +.

 

[DeepState]

Anyone doing work on MVF-AU?








Disclosure: Holder MVF.

 

[DeepState]

Important because the nature of procedures undertaken tilts towards implantation of existing embryos which is different to a decade ago when it was tilted towards harvesting eggs for implantation. Highlights technological risks to the earnings stream.

 

[VSntchr]

RY - I'm not a holder of MVF. But I think its an interesting industry and one that is supported by favourable macroeconomic backdrop. It seems probable that growth rates for cycles will exceed broader GDP growth over the coming decades - due to a number of factors such as declining fertility (due IMO to poor health and environment), increased IVF awareness, new market penetration, female workforce participation, lifestyle choices delaying pregnancy etc etc.

As for MVF specifically, was there anything qualitative that led you to pick them over VRT?

 

[DeepState]

As for MVF specifically, was there anything qualitative that led you to pick them over VRT?

Thanks VS. This is a stand-alone investment for us. I am interested in the absolute valuation. In forming the valuation, consideration will be given to the metrics relevant to VRT.

 

[herzy]

Thanks VS. This is a stand-alone investment for us. I am interested in the absolute valuation. In forming the valuation, consideration will be given to the metrics relevant to VRT.

Could you summarise the reasons for your investment? Macroeconomics aside.

This comes partly from laziness and largely from interest. I find biotech extremely hard to evaluate as a punter, which is a shame given my interest and despite having a BSc.

On an unrelated note, when you say 'us', do you mean The Boat Fund perchance?

 

[DeepState]

Could you summarise the reasons for your investment? Macroeconomics aside.

This comes partly from laziness and largely from interest. I find biotech extremely hard to evaluate as a punter, which is a shame given my interest and despite having a BSc.

On an unrelated note, when you say 'us', do you mean The Boat Fund perchance?

Sorry to be obtuse. The reasons for our current exposure are extremely unlikely to be of interest from an investment perspective.

Us/Our? Oh, I've slipped into plural. It's my imaginary friend. Haven't seen her in a while.

 

[burglar]

Sorry to be obtuse. The reasons for our current exposure are extremely unlikely to be of interest from an investment perspective.

Us/Our? Oh, I've slipped into plural. It's my imaginary friend. Haven't seen her in a while.

Are you starting a family?

 

[DeepState]

Are you starting a family?

That's an interesting take! Nah, we (this 'we' is for real) started and finished starting one some time back. We were fortunate enough not to have to draw upon the science.

Nonetheless, MVF and VRT etc do amazing work to bring that possibility to others. Something around 4% of all births in Aust come with the help of IVF technology. Everyone knows someone who started a family with this assistance or who is trying to do so. The pioneers of the IVF techniques were freaks of nature. Carl Wood was the leader in Australia. His team successfully developed Australia's first IVF birth in 1980 (not the first in the world, the first was in 1978 and Edwards won a Nobel for it). They went on to become MVF. My jaw drops every time I think of the complexity of what these people managed to overcome and harness.

Anyway, it's the investment case I'm ultimately interested in. The outcome will be what it will be.

 

[DeepState]

AGM with Q1 2015 update.

Neg surprises on fresh vs frozen embryo transfers (as opposed to peas), market growth, price competition, direct competition for low intervention centers, did not discuss other price competition emanating from Sydney into key markets, delays in commissioning...but it's ok because tax losses from the IPO will help to lift the outcome to the prospectus target for 2015. Really.

Upsides: diagnostic services doing well. Chairman re-elected with nearly unanimous outcome.

Looks like franchise decay going on. A -13% move today. Seems excessive for the news in isolation but I don't have a handle on valuation to be concrete on this. Consensus is 12.1x FY15. Not immediately suggestive of overvaluation. Float got away four months ago at 16.4x pro-forma FY15. VRT-AU trades at 16.9x FY15. Stock has been falling since a few weeks post IPO. Now 138 vs 185 IPO price.

Preliminary thought is that a decent portion of the price decline over recent months is related to liquidity rather than fundamentals. VRT-AU should be faced with the same difficulties (and was sold down somewhat today) and it seems odd that a valuation multiple for FY15 should be so different on face value. Which is expensive and which is cheap? Maybe it's both. At the moment...dunno.

 

[DeepState]

Some factoids from the research effort thus far:

Reproductive 'intensity' by state is important given the geographic nature of competition. Also, way to go Burgs....



Signs that work stress contributes to reduced fertility...

 

[DeepState]

Some base data required for projection of IVF and related market unit demand.

Number of women in the population for different age bands as projected by the ABS on the assumption of current net immigration rates (hence probably conservative):


The prime group for IVF demand are women in the 30s. Hence growth rate assumptions will heavily depend on the number of women in this age bracket and how that evolves through time:


Demand for IVF results from infertility or difficulty in conceiving. These are the natural rates of conception in a 12 month period. Generally, after this time, a patient becomes a core candidate for IVF treatment of some sort, or at least investigating the possibility:


The age at which women are having children has been increasing but has become more stable in the last five or so years. Part of the growth rate experienced for IVF has come about because the number and proportion of women having children later has increased faster than by demographic trends more generally. These lifestyle choices produce a rate of growth which, all else equal, should not be used as a base case growth rate going forward.


By blending these results with Medicare claims data and household confidence data, it is possible to get a reasonable basis for projections of IVF unit demand. Demographic data is very stable.

The key unknowables aren't really about market-wide demand. They come down to Medicare support (demand for IVF is amazingly dependent on household confidence and hence price sensitive), bargaining power of the IVF specialists and technological breakthroughs. There are also efforts to break the market apart with bulk-billing services. These can only be loss-leaders as no amount of scale benefit could make this profitable. Everyone with a growth story is looking for a greater geographic footprint in Australia and elsewhere. This market is like McDonalds. The service is ultimately a burger. Clients just go to the most convenient one that more or less does the job. It's a real-estate play as much as anything.

 

[skc]

Some base data required for projection of IVF and related market unit demand.

The prime group for IVF demand are women in the 30s. Hence growth rate assumptions will heavily depend on the number of women in this age bracket and how that evolves through time:
View attachment 60542

It's not just about women. There's something in the water about the men as well.

http://www.abc.net.au/news/2013-02-05/more-tv-means-less-sperm-study/4502820

It found those who watched 20 hours or more of television per week had a 44 per cent lower sperm count that those who responded that they watched none or almost none.

Men who did 15 or more hours of moderate to vigorous exercise per week were found to have a 73 per cent higher sperm count than those who exercised less than five hours per week.

"There are some studies that have been done that have shown that sperm counts are falling as the generations go by, but other studies carried out in different countries can't see any effect.

"It's an uncertain, and at the moment still an unknown, area."

Coupled with women starting to have kids in their 30s... when their male parters are likely to be in the 30s as well. Chances are the men exercise would also be less in that age cohert.

 

[coolcup]

Hi Retired Young

Are the charts your own analysis? If so I am very impressed. Is the data all publically available from the ABS or did you have to spend a long time digging it all out?

Great post by the way.