MacMillan Shakespeare’s subsidiary, Plan Partners, is quickly becoming a key division in the company’s portfolio as it capitalises on the vigorous growth of the NDIS. We think NDIS plan management can become a $600 million market by FY25f.
Recent modelling from the Federal Government forecasts there will be more than 859,000 participants in the NDIS by the end of the decade. That is an increase of 374,000 from the current level of 484,700 as at the end of September 2021. The number of participants with plan management funding now represents 51% of all plans as at September 2021 , up from 30% at June 2019.
Plan Partners is the number 2 player with approximately 8% share in a market where plan managers have 51% share. The top 10 managers account for about 40% of the market suggesting there is a very long tail of consolidation opportunity ahead. There is a core of about 31% of self-managed participants and a further 5% that receive Supported Independent
Living (SIL) assistance indicating that the ceiling for plan managers is perhaps 64% of the total market. Realistically, we think plan managers can get to 60% share by FY25f.
Plan managers accounted for approximately $8.3 billion of payments in FY21 or about 36% of total payments. Plan managers’ share of payments is much lower than SIL participants who receive on average $320k compared to an average budget of $54k for non-SIL participants. Plan Partners says its payment processing system is highly efficient catering for more than 1 million invoices in FY21 equating to $700 million in payments to disability providers.
The consolidation route arguably provides a bigger opportunity for Plan Partners and it has recently acquired Plan Tracker in NSW in this regard. Providers with good technology such as
Plan Partners will be the ones to successfully scale up in this relatively new market.
Current policy settings suggest the cost of the NDIS could reach $60 billion in 2030, well above the original $22 billion budget and greater than the cost of Medicare and Aged Care combined. Whoever is in government will need to address the cost growth issue facing the NDIS but we do not think this will be aimed at plan managers who only account for 1% of the total Scheme costs.
Investment view
In addition to the robust growth in Plan Partners, the post-COVID demand for novated leases continues to expand with sales orders struggling to keep pace due to supply constraints on global vehicle production. This situation could persist throughout CY22 and will weigh on MMS’ GRS earnings in the short term.
The near term weakness in the share price presents an opportunity to buy a stock on sub-13x FY22f PE ratio with a dividend yield topping 5%.
As Plan Partners becomes better understood by the market, this will add to the list of positive features in MMS that we believe justifies a Buy recommendation.
