In today’s daily we have covered stock research on Greencross Limited (BUY).








 

The S&P 500 was down by 10.75 points or 0.51% on Tuesday and closed at 2093.67 points.  New homes sales climbed 7.8 per cent in February to their highest level for seven years, figures from the Commerce Department showed. Copper miner and oil producerFreeport McMoRan added its name to a very small list on Tuesday when it announced a plan to slash its dividend by more than four-fifths in a bid to bolster its balance sheet. Just three other S&P 500 companies have cut their dividend this year. McCormick & Co. said its earnings fell 15%, adding that a stronger U.S. dollar weighed on sales growth in the quarter ended February. Still, the company’s adjusted results beat expectations. Shares rose 2.6%.
  
Morgan Stanley's chief financial officer Ruth Porat is ending an almost 30 year career at the US investment bank to join Google. There was a more confident performance from European stock markets, with the FTSE Eurofirst 300 rallying 0.3 per cent and the Xetra Dax in Frankfurt climbing 0.9 per cent. The Nikkei 225 in Tokyo slipped 0.2 per cent while the Shanghai Composite edged up 0.1 per cent. Linn Energy LLC said it has teamed up with private-equity firm Quantum Energy Partners to make acquisitions in the oil-and-gas space. Linn shares advanced 4%.



Google Daily Chart (Source - Thomson Reuters)
 

S&P ASX 200 was up by 13.00 points or 0.22% on Tuesday and closed at 5969.10 points. Among the miners, BHP Billiton and Rio Tinto again went in opposite directions. BHPpicked up 0.7 per cent to $31.22 while Rio sagged 1.4 per cent to $57.37. Arrium was the biggest winner among the top 200 stocks, surging 20 per cent to 21¢ in high volume, but without any apparent reason. Woodside Petroleum declined 0.3 per cent to $35.41 after the company announced it would cut 300 jobs and freeze workers' pay to combat the heavy decline in oil prices. 

Kathmandu was the day's biggest loser, sinking 12.4 per cent to $1.37. The company had reported a 2 per cent fall in same-store sales in the first seven weeks of the new half.Spotless was a major success story, picking up a hefty gain of 7.2 per cent to a record closing high of $2.36 after private equity firm Pacific Equity Partners sold $240 million worth of stock in the cleaning and contracting caterer. Internet provider TPG rose 3.5 per cent to $9.14 after founder David Teoh announced a set of stellar half-year results, including a 59 per cent revenue rise and a profit estimate revised up by 5 per cent. The major banks were mixed. The Commonwealth Bank of Australia slid 0.25 per cent to $95.24 and National Australia Bank slipped further, 0.7 per cent to $38.31. Meanwhile, ANZ climbed 0.25 per cent to $36.90 and Westpac lifted 0.2 per cent to $39.64. 


Spotless Group Daily Chart (Source – Thomson Reuters)

 
Top Performers on the ASX 200 were :-

 

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Greencross Limited Video


 

Stock Of the Day  - Greencross  (BUY)

Greencross limited (GXL) recently reported a pleasing 1H15 result with 6.3% group Like-for-Like (LFL) sales growth which primarily helped the Company drive 81% surge in the underlying Net Profit after Tax ($19 million). Further, this underlying NPAT resulted in EPS of 17.2 cents which is an increase of 48% on H1 FY2014. The foregoing also represented 48% of full year FY2015 underlying EPS guidance of 36 cents. A fully franked interim dividend of 8.0 cents per share indicative of 45% rise as compared to the dividend for the previous corresponding period has been declared. The opportunity to reinvest the dividends through the dividend reinvestment plan has been expressed with issuance of shares at 2.5% discount to the volume weighted average price for shares traded over the DRP Pricing Period.


Performance (Source – Company Reports)

The LFL sales growth was noted across all the businesses and geographic segments. The Company also reported that 43% rise in underlying revenue to $307.5 million was found to be steered by the LFL sales growth, acquisition of City Farmers, opening of new store and vet acquisitions. Statutory EBITDA including the effect of acquisition and integration costs associated with City Farmers rose by 45% to $22.0 million. GXL reported that the underlying EBITDA (excluding the one off costs) increased by 62% to $41.6 million indicative of economies of scale, better gross margins and delivery of coalition.

Addition of 61 retail stores to the network in FY15 up till now with acquisition of 42 City Farmers stores in H1, addition of 14 new stores in H1 and addition of 7 new stores in H2 have been reported. 14 clinics added to the network in FY15 with acquisition of 8 general practices and 2 pet crematoria in H1, acquisition of 1 general practice and investment in 4 veterinary clinics in H2 are other updates. The Company expects the vet acquisitions to deliver $27 million in annualised revenue making it possible for GXL to achieve its previous target of $25 million in acquired annualised vet revenue in FY15.


LFL Sales (Source – Company Reports)

The Company has also conveyed about cost savings from the integration of Greencross and Mammoth based on alignment of supplier terms, utilisation of shared services and leveraging GXL’s increased scale. Development approvals for co-located sites at Castle Hill, Chatswood and Campbelltown with good performance by existing co-located stores/clinics at Kawana and Brookvale offer benefits.


1H15 % Revenue Contribution by Business (Source – Company Reports)

The Company completed the retail remerchandising in 30 veterinary clinics with reportedly encouraging results. Remerchandising of another 50 clinics is believed to be completed by the end of FY15. The acquisition of City Farmers and integration of 42 retail stores into the retail fleet has been helpful for the Company. The healthy pets plus subscriptions within veterinary services has also gone up to 39,000 from 30,000 as at FY14.


Store and Clinic Numbers (Source – Company Reports)

As per the outlook, GXL aims to add 25 stores to the network in FY15. 21 stores have been already opened and lease commitments have been entered into for a further 5 stores. GXL has conveyed about commencement of construction for another 4 stores expected to open in early FY16. The City Farmers performance in H1 FY15 has been good with revenue of $55.3 million and EBITDA of $9.5 million in 24 weeks of ownership since acquisition.

Australian and New Zealand Pet Care Market (Source – Company Reports)

GXL reported that its net debt has been $201m with net debt to equity of 51%. It is expected that the debt metrics may moderate over FY16 or FY17. Increased market opportunity and on-track performance seems to be in favor of GXL.


GXL Daily Chart (Source - Thomson Reuters)

Accordingly, we put BUY recommendation for this stock at the current price of $8.68.
 

Level 13  167 Macquarie Street
Sydney NSW 2000 Australia
E-Mail - [email protected]
Phone - 02 8667 3147


        
Note - You can also view this daily in the special reports section.

 

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