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Pet stocks have legs, or rather four – Star Investing

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Pet spending in Australia is rising. So how can ASX investors capitalize?

Australia has one of the world’s highest pet ownership rates.

Home to more than 24 million pets, pets occupy appreciated 62 per cent of Australian households.

The most common pets in Australia are dogs and cats, with dogs in almost two out of five homes (38 per cent) and cats in almost three out of ten (29 per cent).

Behind this favorite pair, Australians are also indifferent to keeping domestic fish (11.8 percent), birds (11.8 percent), small mammals (3.1 percent) and reptiles (2.7 percent).

All this down, wool, feathers and scales contribute to the growth of the pet care sector.

In 2016 alone, Australian households spent about $ 12.2 billion on pet goods and services, up 42 percent from 2013.

Why are animal costs rising?

The biggest factor affecting pet costs is the change in pet perception.

Survey data for 2016 show that 65 per cent of Australian families with dogs and 66 per cent of families with cats now consider their pets family members.

Thanks to this increase in humanization come greater costs for services and products related to pet welfare, especially for middle-income and high-income people.

Between 2014 and 2016, Australians spent 33 percent more on dogs, 35 percent more on cats and 54 percent more on fish in most categories of pet care products.

This growth is even more impressive given the flat retail sales in Australia over the same period.

In tandem with this rising cost, there have been changes in thinking about the role of veterinarians.

Between 2013 and 2016, surveys show that pet owners are increasingly looking at the role of the veterinarian in maintaining the health of their pets (71 percent) rather than simply treating them when they are sick (72 percent).

As a compliment to these extensive changes in perception, an increase in total pet ownership is projected. Newgate poll data shows that across Australia, 53 per cent of people would like a new type of pet, and 15 per cent of owners who don’t have pets plan to buy them in the next 12 months.

In addition to this, the desire to have a pet is stronger among the younger generations: 69 per cent of Generation Y Australians want to have a pet in the future.

These factors, considered together, suggest a bullish outlook for the pet market.

So what ASX pet stocks are available to investors?

Pet supplies can be broadly divided into three groups: retail and veterinary services, therapy, pet insurance and booking logistics.

Retail and veterinary animal care services

The Retail and Veterinary Services category is home to ASX Petcare’s largest player, National Veterinary Care Ltd. (ASX: NVL).

Veterinary service provider, NVL is now the largest pet population on ASX since the acquisition of Greencross Limited (ASX: GXL) in February 2019 by American private equity firm TPG.

In the second half of 2018, NVL recorded $ 2.62 million in net profit after tax and $ 3.76 million in net profit after tax.

NVL ended 2018 with the acquisition of Pet Doctors Group, adding 25 clinics and businesses to its books.

Another well-known veterinary and retail player is Apiam Animal Health Limited (ASX: AHX).

AHX is the largest provider of veterinary services in rural areas, which includes more than 140 veterinary practices and offers veterinary wholesale, warehousing, logistics and other ancillary services.

The company’s veterinary services extend not only to pets, but also to animal husbandry – a market in which it dominates.

In 2018, AHX recorded strong growth: the company’s revenue was $ 56.1 million, up 10.4 percent from 2017.

Therapeutic agents for pets

The market for pet therapeutics is more of a wild west than the veterinary sector, which employs several new players and companies that keep half-paws at the door.

Cannpal Animal Therapeutics (ASX: CP1) this is one little cap focused on developing herbal therapeutic products for pets aimed at the endocannabinoid system.

This therapeutic proposal was an effective means of anesthetizing pets. (ASX: ZLD).

In February, CP1 received ethical approval for a phase 2A study of its product CPAT-01, aimed at controlling pain and inflammation in dogs suffering from osteoarthritis.

A fresh participant of ASX, Ecofibre Limited (ASX: EOF)also has ambitions to expand into the pet food market.

Similarly, before it was listed as Cann Global (ASX: QBL)then named Queensland Bauxite (ASX: QBL) there was also a brief foray into the pet therapy market.

Pet insurance and booking logistics

Increasing attention to pet welfare has also spawned a boom in pet insurance and the logistics booking market.

Clinical software platform of the 1st group (ASX: 1ST) recently expanded its offering to include a pet services platform called PetYeti.

Last year, the company signed an agreement to deploy its digital online booking platform to 120 PETstock care sites across Australia, adding another 85 veterinary practices in 2019 after signing a two-year agreement with Vetcentric.

In 2019, 1ST also signed an agreement with health insurance (and pet) giant Medibank to implement experimental software for online booking.

Ltd. Kogan.com (ASX: KGN)an online retailer in its purest form, in 2016 partnered with PetSure to offer pet insurance.

This adds an already extensive KGN portfolio consisting of Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance, Kogan Health and Kogan Travel.

In general, the pet care industry provides a diverse and favorable ground for investment. Due to the fact that the market is showing positive signs among established and new players, supported by strong consumer performance, pet stocks look like the right tree for investors.

This content is not advice on financial products. You should consider getting independent advice before making any financial decisions.

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