Greencross Limited (ASX: GXL)

Expansion into private label products and exclusive brands-Greencross, the small-cap pet Company expects that it will deliver an underlying EBITDA between $97 million and $100 million in FY18. The Company expects to recognise between $16 million and $20 million of primarily non-cash impairments which will be reflected in the FY2018 full-year statutory result. The Group will receive savings from back-office efficiencies, rebalancing of rosters to provide better customer experience during evening and weekend trading and will receive utility cost efficiencies from new technology and tightening of professional fee discounting policies in the vet business. The Group will reinvest some part of these savings in customer-facing technology and data analytics to improve customer engagement and in-store experience that will enhance subscription capability and will leverage the 1.8 million active members in Greencross loyalty programs. The Company has net debt of $280 million and $50 million of headroom under its senior debt facilities (as on 9 May 2018).


Australian Veterinary-H1 FY2018 Revenue Split (Source: Company Reports)

The Group is taking immediate and decisive action to reset its cost base. Greencross is well positioned to execute its integrated petcare strategy. The Company is planning to focus on cross-selling across Greencross’ retail and service offerings and is planning to expand its private label retail offering. Its veterinary business has failed to deliver the previously budgeted uplift in second-half activity primarily due to disappointing visit numbers in both of its standalone GP clinics and instore clinics. Meanwhile, one of its Director Simon Leonard Hickey acquired 58,112 fully paid ordinary shares from the market. Lazard Asset Management Pacific Co changed its substantial holding and now holds 7.72 per cent of the voting power. In one year, the stock prices fell by 17.85 per cent and were down by 15.86 per cent in last one month. We recommend to “Hold” the stock at the current market price of $4.49 and wait for the Group to improve its performance as management is confident to yield better results with an improvement in outlook.
 

Telstra Corporation Limited (ASX: TLS)

Developing new technologies – While Telstra continues to focus on reducing costs with FY2018 underlying core fixed costs expected to drop by 7%, the market is fairly cautious of the overall performance. The Company lately launched a Debt Issuance Program for €15,000,000,000 and under this program the Group can issue bonds, notes and other debt instruments from time to time. Application has been made for the listing and quotation of any Notes on the Singapore Exchange Securities Trading Limited (the “SGXST”) which were agreed at the time of issue thereof to be so listed on the official list of the SGX-ST. It has been noted that data grows at 50 percent per annum and clearly telecommunications networks have become one of, if not the most important piece of critical infrastructure around the world. TLS will continue its efforts as it moves to the next wave of technology innovation with 5G. Further, the group reaffirmed its FY18 guidance and expects income of $27.6 billion to $29.5 billion for the full year while EBITDA is expected to be at the bottom end of the range of $10.1 billion to $10.6 billion after absorbing incremental restructuring costs for the same period.


Productivity Program Framework (Source: Company Reports)

The Group has extended its mobile network reach by probably more than another 100,000 square kilometres where it has the greatest coverage in the country. It is working towards building completely a new technology stack for both of its enterprise customers, and that's actually now live and, in the market, and also for its mass market consumer. In the past one year, the stock has declined by 36.41 per cent and is trading at its 52-week low levels with intense competition and other telecom industry challenges. As of now, we give a “Hold” recommendation on the stock at the current market price of $ 2.76 while investors keep a watch on the upcoming strategy update on 20 June 2018, specially with regards to any dividend cuts.

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