Coca-Cola Amatil Ltd

A bump from the Indonesian Business: Coca-Cola Amatil Ltd.’s (ASX: CCL) stock fell 1.64% on June 20, 2018 at the back of negative sentiments erupting in the market given performance of the Indonesian business. The company had already reported that in 2018 Indonesia & PNG had a subdued start and soft market conditions are continuing in Indonesia. Concerns regarding an improved trajectory in its Australian beverages segment have also risen, which was insufficient to offset challenges experienced in 2017. PNG is cycling the pre-election stimulus of the first half of last year and is facing some operational issues, which are being rectified. Additionally, CCL is targeting mid-single digit EPS growth for the medium term. Meanwhile, CCL stock has risen 4.93% in three months as on June 19, 2018 and is trading at a P/E of 15.30x. As of now, we give a “Hold” recommendation on the stock at the current price of $ 9.000.
 

Greencross Ltd

Under short-selling radar and rising concerns over performance in long term: Greencross Ltd.’s (ASX: GXL) stock fell 3.4% on June 20, 2018 while it has been a target of short sellers in the past few weeks. The group has been under the pressure with regards to roll out of in-store clinics while it already downgraded its full-year 2018 earnings forecast due to the soft sales growth from its veterinary business in Australia. GXL now expects EBITDA to be between $97 million and $100 million. The company also expects to incur between $16 million and $20 million of primarily non-cash impairments in FY18, which will impact its full year statutory result. Earlier the company was expecting the full-year EBITDA of $108 million. Further, the veterinary division is now expected to deliver a $2.7 million shortfall in EBITDA in FY 18 compared to previous expectations. The veterinary business has failed to deliver the previously budgeted rise in second half activity primarily due to disappointing visit numbers in both the standalone GP clinics and in-store clinics. Meanwhile, GXL stock has risen 3.05% in one month as on June 19, 2018 and is trading at a reasonable P/E. As of now, we give a “Hold” recommendation on the stock at the current price of $ 4.240.
 

McGrath Ltd

Secures strategic investment by Aqualand: McGrath Ltd.’s (ASX: MEA) stock rocketed 26.5% on June 20, 2018 after the company secured a $10.7 million (before costs) strategic equity investment from one of Australia’s premier residential property development and investment groups, Aqualand Group. The company is raising fund through a placement of 25,189,880 shares at $0.425 per share, in two tranches as per the terms of a subscription agreement. The company is under the first tranche, which has now been completed; and Aqualand has acquired an initial stake of 8.7% in MEA. The second tranche, which is subject to McGrath shareholder approval, will give Aqualand a further interest of 6.3% in MEA. Therefore, after the completion of both tranches, Aqualand will be the second largest shareholder of McGrath with a 15% relevant interest. Further, the placement reflects a 25.0% premium to the last closing price (19 June 2018) and a 16.9% premium to the 60 day VWAP (19 June 2018). Both McGrath and Aqualand entered into a strategic relationship to explore opportunities and to work more closely together on prestige project marketing opportunities. Meanwhile, MEA stock has fallen 39% in last six months as on June 19, 2018 basis its soft trading update on full year underlying EBITDA guidance (range of $5.0-$5.5 million against earlier guidance of between $10.6 million and $11.6 million). As of now, we would recommend to avoid the stock at the current price of $ 0.430 and look for more positives.
 

Strategic Investment Undertaken at a Premium (Source: Company Reports)

 
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