Big profits from small dogs

Big profits from small dogs

 big-dog-little-dog

I am a big fan of Peter Lynch's theory of buying companies you know and use. This way you end up with a portfolio of high quality companies that you can be confident holding through the tough times and reap the benefits in the good. Greencross (GXL) is one such company that ticks a lot of boxes for me.  I am both a shareholder and a customer of this great company.

Greencross owns a network of around 130 Vet clinics and over 200 Pet Barn retail outlets.

greencross-vets                                                petbarn

Greencross currently controls around 8% of the $7 billion market with management having a long term target to capture a 20% share. Greencross is unique in that it has an integrated market being both a retailer of Pet Supplies plus offering Vet services.  The cross selling works seamlessly. I should know I spend enough at both of these places.

greencrossIn the last year I have had two new additions to my family, two black pugs Charlie and Coco. They live with my family in our unit and I love them to bits.   I first discovered Pet Barn when Charlie came to live with us and I needed to buy puppy supplies.  They are a one stop shop for all your pet needs and once I bought some puppy food (and alot of other things) I was given a voucher for a “Free” visit with a Greencross Vet.  Before I knew it I had handed over more money to Greencross to become a Healthy Pets Plus member which basically ensures that I only send my dog to a Greencross Vet.  Greencross have got me for life!

I spend money on my two pugs to keep them healthy and happy and I am not alone. I can see a boom emerging with people like me owning small dogs in units. Body Corporates around the country have eased up on owning dogs below 10kg in units so there is nothing stopping the growth in small pet ownership. This is going to become a great tailwind for Greencross in the future.

These  pampered little pooches do not come cheap which is why I own Greencrosss shares. I have to try to recoup my vet fees and pet supplies somehow.  The company makes around $40 million per annum and pays a dividend of approximately 3% fully franked. Management are projecting the company to grow to 350 Pet Barn stores and 350 Greencross Vet clinics around the country.  Private equity recently tried to buy the entire company after the share price fell. They did not succeed but it does show the potential. The stock is now trading at $6.85 around 36% below its record high so I can see some decent upside here. 

Buy Greencross WOOF WOOF!!

 

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