Surfstitch Group Ltd

SRF Details
·         Massive crash on earnings downgrade: SurfStitch Group Ltd (ASX: SRF) tumbled 23.5% on May 22, 2017, after downgrading the guidance for FY17. During H1FY17, the company has made substantial progress with its plans to reduce costs, streamline operations and transfer its core SurfStitch.com website to a new platform. However, the general business environment for apparel and footwear has been grim in each of the group’s key markets, particularly in the UK, where the Surfdome business has experienced intense margin and sales pressure. Further, it led to deterioration in the forecast underlying EBITDA loss for FY 2017 to $10.5m -  $11.5m against $5m to $6.5m of previously stated guidance.

·         Recommendation: The stock has slipped by 79.6% % over the past twelve months and 44% in last three months (as on May 19, 2017) on account of financial scenario and subdued market environment. We give a “Hold” recommendation on the stock at the current price of $ 0.075

Southern Cross Media Group Ltd

SXL Details
·         Extended losses over guidance reduction: Shares of Southern Cross Media Group Ltd (ASX: SXL) extended losses for second trading day (2.5% fall on May 22, 2017) after announcing the disposal of northern NSW (NNSW) television assets and operations to the WIN Television Network and completion of the sale to take place with effect from 31 May 2017. The sale proceeds of $55m are payable in instalments - $45m on completion and $10m on the first anniversary of completion, with the second instalment secured by an unconditional bank guarantee. The estimated FY2018 EBITDA impact from disposal of the group’s NNSW TV operations is $10m, and, accounting for the proceeds from the sale further reducing net financing costs, the impact on NPAT is expected to be $6m. During H1FY17 results, the company provided guidance of $177m - $183 million of EBITDA for FY2017. However, considering the current and forecast trading environment, the company now expects FY2017 trading EBITDA to fall slightly below the prior year’s EBITDA of $168m.

·         Recommendation: The stock plunged 12.2% over the past three months and 8.3% in last one month (as on May 19, 2017). Given the downgraded guidance, future prospects and trading scenario, we maintain an “Expensive” recommendation on the stock at the current price of $ 1.19
 

Debt Scenario (Source: Company Reports)

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