Henry Schein, Inc. HSIC
HSIC's soon-to-spin Vets First Corp is growing far faster than the Street thinks — proprietary data shows 75% install-base growth, driving a $106-126 SOTP target vs. $84 today.
Thesis
Spruce Point is long Henry Schein ahead of the Q4 2018 spin-merger that combines HSIC's animal-health business with Vets First Choice (VFC), founded by IDEXX founder David Shaw. Using a proprietary zip-code scrape of VFC's Vet Finder API plus a 257-vet survey, Spruce Point finds VFC's prescription platform already has 7,900 practices (vs. 5,100 last disclosed) growing +80/week toward 9,000 by year-end, with cohort sales growing 53% and 48% in years two and three. They model pro forma EBITDA of $501M by 2020 — materially above Morgan Stanley's $348M and Goldman's $407M whisper numbers — and apply a 25x Idexx-adjacent multiple to VFC plus 12x to legacy HSIC to derive a $106 base-case price target (26% upside), with a $126 bull case (50%) if VFC earns a peer-high 32x multiple.
SCQA
HSIC announced in April 2018 it would spin and merge its animal-health unit with Vets First Choice to form Vets First Corp, but the S-1/S-4 haven't been filed and analysts lack data on VFC's traction.
Sell-side models are anchored to the dental headwinds and stale 5,100-practice disclosure; only 5 of 16 analysts rate HSIC Buy and whisper EBITDA numbers sit $100M+ below what VFC's real adoption implies.
Go long HSIC now — proprietary scrape and vet survey prove VFC's install base is 7,900 and accelerating, so the re-rating will come as the S-1, analyst day, and when-issued trading reveal the growth.
Sum-of-parts base case values HSIC at $106/share (26% upside) valuing VFC at 25x 2020E EBITDA of $501M; bull case of $126 (50% upside) applies a 32x peer-high multiple like IDEXX.
The three reasons
- 1
Proprietary data scrape shows VFC has 7,900 vet practices vs. 5,100 disclosed — 75% install-base growth in 2018
- 2
Vets First Corp will reach ~$500M EBITDA by 2020, more than double 2017 and well above whisper numbers
- 3
Sum-of-parts yields $106 base / $126 bull target vs. $84 today — 26-50% upside
Primary demands
- Buy HSIC shares ahead of the Vets First Corp spin-off to capture 30-50% upside
- Recognize that Vets First Choice is materially outperforming sell-side expectations
- Value the pro forma SpinCo at an Idexx-like animal health multiple of 25x EBITDA
KPIs cited
Pattern membership
Precedents cited
- Elanco Animal Health IPO from Eli Lilly (NYSE: ELAN)
- IDEXX Laboratories (built by David Shaw, VFC founder's father, to ~$22B market cap)
- Academic evidence that spin-offs outperform the broader market
Composition what's on the 40 slides
Slide gallery ·
Notes
Unusual Spruce Point report — this is a LONG thesis (Strong Buy), not a short report. Spruce Point normally shorts, so this is a notable genre-break specimen. The deck's signature moves are the proprietary Vet Finder API scrape (40,000 zip codes) and the 257-vet survey used to reveal install-base growth ahead of the S-1 filing — a playbook for data-driven differential disclosure. Cover is a satirical photo-illustration of a veterinarian injecting a bucking horse outside the NYSE captioned 'This shot won't hurt at all, giddy up!' — unusual editorial flourish for an institutional research note. SCQA is crisp: VFC is being under-estimated; our data proves it; buy HSIC now. No author signature; attributed to the firm.