Greencross Limited

Greencross Limited(ASX: GXL)has entered into a Scheme Implementation Agreement with Vermont Aus Pty Ltd, an entity owned by funds managed by TPG Capital Asia and TPG Growth with regards to acquisition of 100% of Greencross shares. Under this scheme, GXL shareholders will be entitled to receive $5.55 per share. Association with the leading global private firm, TPG holding over US$94billion of AUM will support the business growth of GXL.

Healthy network of retail stores and presence along with wide range of services:As on November 13, 2018, GXL owns around 250 retail stores with their operation under the brand names of Petbarn and City Farmers in Australia and Animates in New Zealand owns and operates across the largest network of veterinary practices in Australia with presence in more than 160 GP vet clinics and over 30 specialist and emergency hospitals. GXL has its presence in online business where customers can order online and get the products delivered right back to their home or they can pick up from the store by using simple click and collect option and use its wide range of pet services ranging from dog washing, to dog walking, pet minding, puppy training, pet adoption to pet insurance.

Moderate Financial Metrics: Retail segment which accounts for almost 70% of the group revenue posted strong results for FY18, delivering 5.1% rise in LFL sales underpinned by 3.1% growth in LFL transaction and increased basket size. 5% increase in Australian retail underlying EBITDA growth up to $74.4 million was posted in FY18. Group Revenue posted 7.5% rise to $878.7 million, underpinned by the expansion of network and 4.9% growth was recorded under LFL sales. PAT posted 51% fall up to $20.7m owing to expenses related to the restructuring, acquisition, and impairment of capitalized assets amounting to $24.2 million. Underlying EBITDA recorded fall up to $97.6m in FY18.

Technically,the scrip has shown an upside move from the month of September and is continuing the trend for the current month of November. On a 3-month time frame with monthly interval, higher high formation is well indicated on the price charts.
Fundamentally,the market cap of GXL was recorded at $651.7m, with P/E of 30.88x and beta below 1x as on November 13.GXL with its moderate financials along with varied services and strong network presence exhibits a “Hold” at the current levels of $5.28.

National Veterinary Care Ltd

National Veterinary Care Ltd (ASX: NVL) has entered into binding agreement on October 31, 2018 to acquire four clinics in Australia. Annual revenue of approximately $6.5 m and an aggregate annual EBIT of approximately $1.36m is expected to be delivered from these four clinics.

In line with its long-term strategy to expand the NVL network of clinics through acquisition and driving organic growth at a clinic level, NVL has acquiredPet Doctors Group in New Zealand (NZ) on September 12, 2018. This acquisition will help NVL to scale its operations and footprints in NZ and establish itself as the market leader with a combined network of 33 clinics in its portfolio.

Margins under pressure on account of operating expenses: NVL posted 26% growth in revenue up to $84.2m in FY18 from $66.9m in FY17, underpinned by the acquisitions of 13 new clinics during the financial year. Underlying EBITDA margins posted a drop to 15.9% in FY18 from 18.1% in FY17, and these were mainly driven by the higher operating costs relative to revenue. Underlying NPAT margins dropped to 7.7% in FY18 as compared to Underlying NPAT margins of 8.8% in FY17. Considerable drop of around 52% in cash from operating activities was noted, mainly driven by the large initial income tax payments, and acquisition and integration costs. Cash and cash equivalents reported negatively for FY18.

Technically, the scrip has shown downside move from the month of September and is continuing the trend for the current month of November. On a 3-month time frame with monthly interval, lower low formation is well indicated on the price charts.
Fundamentally, the market cap of NVL was recorded at $144.05m, with P/E of 20.23x. With margins under pressure and new acquisitions in pocket, NVL has fallen more than 12% in a span of six months. We believe that the stock is a “Watch” at the current levels of $2.120.
  

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