PBT margin on revenue is consistently over 25% here. Businesses with this kind of financial background do not stay at a PE of 10. ROE is strong and rising after COVID slump. Everything points to a cyclical rebound with strength returning to pre COVID levels.1H25 financials are very strong and up on all metrics to prior periods. These results were achieved during a financial period with a public that was well aware of the 700 or so women who litigated MVF. However, they still chose to do their IVF procedure through this company, hence the strong financials.
I meander on all the pivotal points and their impact on aspects of the firm's future financials. Such as online reviews, which are the lowest of any IVF firm. It is natural to assume that poor online reviews next to competitors would see a business dwindle and ultimately lose all of its clientele to its competitors. A high turnover of patients naturally means a high numerical concentration of negative experiences who eagerly run to vent online. Smaller operators are rather militant in encouraging clients with a positive experience to leave a review, as it is more relational, clients will leave a review.
McDonalds has far worse reviews than Monash, but remains a leading provider of cooked meals, why don't people boycott and go for smaller operators who have better reviews? It is a very similar business after all. Can't make a baby if you do not eat a burger. Anyway, I digress!
In terms of numbers, MVF has astonishingly low review numbers in comparison to the number of clients that it tends to. I suggest if their service was all that horrendous, there ought to be thousands of bad reviews over the years rather than the few dozen over the span of 5-10 years. I also expect that due to the institutional nature of MVF, clients would not be encouraged to leave reviews for positive experience compared to the owner/operator fertility clinic which is more relational.
The point is that those seen by private clinics would see a very high turnover of positive experience = positive review, while institutional positive results are gone largely unnoticed. It is very strange the low volume of reviews of a firm that services so many people. Also, the sensitive nature of their reporting would signal that any minor grievance would be an announceable event. For a firm that services the most IVF patients in Australia, with so few negative reviews in comparison and a small number of grievances would suggest that they do quiet well indeed in the scheme of things.
If we look at the numbers, they made $250M in revenue last financial year. Do not forget this is above market cap at this point. In their last report they did over 11,401 IVF cycles. Yes, 11,401! Thats just in one year. Now, not all of that revenue is derived from IVF cycles. They also have women's imaging services (growth of $3.5M in FY24 from FY23), day hospitals and genetics (growth of $8.6M in FY24 from FY23) and other services of around $11M. If we assume that of the $250M of revenue, that $200M is purely IVF cycles, then divide 200M by 11,401 we get a figure of $17,542 per IVF cycle. This 50% above the national average of $11,566, which the public is happy to pay to an established provider over a shop front operator! If those cycles included additional services such as pre-implantation genetic testing ($3000-$7000), donor sperm/eggs, embryo freezing, ICSI and assisted hatching, then the cost is justified. Being a larger operator, MVF likely has internal synergies where they either encourage clients to take up extra services to increase their chances or they amalgamate the extra services with the IVF cycle.
They report about 8590 patient registrations in 2024, see the below chart which also shows the strong growth in the business. Of those patients, if 5000 of them actually underwent an IVF cycle during the financial year, that would mean that it takes on average 2 IVF cycles to conceive a child or about $30,000 in total to have a child. This is a rather small price to pay. About 20,000 babies are born through the IVF cycle each year in Australia. If the above reported numbers are anything to go by, MVF accounts for 20% to 25% of that 20,000. Smaller operators simply do not have the services necessary to handle extra clients. Noone else comes even close to taking up this share of the IVF industry. I still think this is a strong business model built of Roman concrete.
I will also note the horrendous public media coverage that Qantas received shortly after COVID, in the years of 2021 and 2022. Rightly so they did, their behaviour was atrocious toward the customer. If you listened to the spin, you would have thought they were done for, it's over, they were universally hated. But see now they are doing better than ever financially. Although they have monopoly, the point is that vehement negative coverage does not equal death of the business. As I have argued in prior posts, negative coverage works like free advertising, better some than none. This is how celebrities build their careers.
Again, the safest time to travel by Air was after 9/11. The cheapest and safest time to visit Istanbul was right after its terrorist attacks. People brush their teeth with extra care after having one removed at the dentist. The safest drivers are the ones who were recently in a prang/fender bender. People tend to take the best care of their health after having a health scare/emergency. MVF will tighten the strings and employees will be put on notice. The culture is changing; this is now the best place to get IVF done after these debacles while the smaller operators may feel safer, more reckless and emboldened because of their competitor's mistake.
I like the proactive approach of management, especially the new acting CEO releasing a heartfelt message to clients for what its worth. See link below. It is always darkest before the dawn. Growth in revenue does not lie. Conversion of revenue to PBT is strong, margins are growing and so is ROE. I'm slowly beginning to see the forest from the trees again.
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