G8 Education Ltd

GEM Details

·         Positive outlook boosted the stock sentiment: G8 Education Ltd (ASX: GEM) stock rallied over 3.5% on May 30, 2017driven by the recent positive outlook. GEM expects to generate an underlying EBIT of mid-to-high $170’s million for FY17 despite pressure in occupancy levels. The group has been increasing prices as well as is focused on their costs to offset the occupancy pressure. The group also reported that their EBIT and margins are tracking ahead of schedule. GEM is positive on reducing the gearing (Net Debt/EBITDA) from 2.2 times to 1.1 times (through the recent capital raising), in order to have an improved balance sheet flexibility to pursue growth plans. The group’s launch of the “Jobs for Families” childcare package would enable to achieve a more affordable and accessible child care.

·         Recommendation: GEM stock corrected over 10.8% in the last three months (as of May 29, 2017) on concerns of softer occupancy levels. On the other hand, the group’s stock sentiment got a boost from positive guidance. We reiterate our “Hold” recommendation on the stock at the current price of $ 3.51
 

Strategic framework (Source: Company reports) 

Western Areas Ltd

WSA Details

·         Rising nickel prices drove the stock sentiment: Western Areas Ltd (ASX: WSA) stock enhanced over 3.7% on May 30, 2017driven by the nickel prices. Moreover, the group recently reported that they expect anA$13.3m rise in post?tax FY17 earnings as WSA has ceased to equity account the investment in Bluejay Mining Plc (earlier FinnAust Mining Plc) during the current half.  

·         Recommendation:WSA stock lost over 32.5% in the last six months (as of May 29, 2017) but consolidated this month and recovered over 0.5% in the last four weeks.We recommend a “Buy” on the stock at the current price of $ 2.22
 

Growth strategy (Source: Company reports)

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