Stocks’ Details
 

Greencross Limited

In-line performance and rise in interim dividend: Greencross Limited (ASX: GXL) is Australia’s largest integrated Pet care company, with over 130 veterinary practices and over 230 pet specialty retail stores in Australia and New Zealand. We assess the 1HFY18 result to be positive as the group’s revenue increased by 8.8% to $433.3 Mn in 1HFY18 from 398.3 Mn in 1HFY17. There was a 4.5% Group Like for Like (“LFL”) sales growth and network expansion during the same period. Gross margin increased by 10.2% to 244.3 Mn in 1HFY18 from $221.7 Mn in 1HFY17. Gross margin % expanded by 72 bps to 56.4% in 1HFY18 from 55.7% in 1HFY17. The Australian retail gross margin decreased marginally by 30 bps to 47.7% with favourable sales mix whereas Australian veterinary services gross margin increased by 150 bps to 79.0% because of higher contribution from specialist and emergency operations. EBITDA came at $54.4 Mn in first half of the year as compared to $50.0 Mn in 1HFY17, up by 8.8% YoY. NPAT (post minorities) stood at $23.2 Mn against $21.3 Mn, reflecting an increase of 8.9% YoY. This represents that the top-line growth in the first half of the year translated directly into bottom line growth. YoY EPS grew by 7.1% aided mainly by top-line growth. Further, the business continues to perform in line with plan as per FY2018 YTD and the company remains comfortable with market consensus for the full year result at the back of continuous support from growth catalysts that include online, in-store GP clinics and specialist and emergency hospitals. GXL expects the full year effective tax rate to be about 28%.

The board of the company had declared a fully franked interim dividend for six months ending 31 December 2017, of 10 cents per share (up 5% on pcp) and this is to be paid on 23 March 2018 with an ex-dividend date of 27 February 2018.

GXL stock price has fallen by 10.06% in the past six months and same declined by 6.23% in last five days as on March 02, 2018 owing to some concerns over strength in online sales given the competitive scenario. We have a “Hold” on the stock at the current market price of $5.50


Expansion in Store and Clinic Network (Source: Company Reports)
 

National Veterinary Care Limited

Splendid Performance while EBITDA margin is a concern: National Veterinary Care Limited (ASX: NVL), another leading listed veterinary care provider in Australia and New Zealand, recently acquired seven clinics to expand the group’s penetration and had also settled two veterinary clinics in Queensland. Revenue during 1HFY18 was recorded at 41.6 Mn vs $32.6 Mn in 1HFY17, marking a growth of 27.8% YoY. The increase in revenue was primarily driven by acquisition and organic growth in its existing portfolio. Underlying EBITDA marginally grew by 5% YoY to $6.3 Mn in 1HFY18 vs $6.0 Mn in 1HFY17. This was influenced by several key factors including: the acquisition of seven general practise veterinary clinics, the disposal of two emergency clinics, and increased investment in clinic support functions during the same period. Thereby, Underlying EBITDA Margin for the first half of the year declined by 290 bps to 15.7% as compared to 18.6% in 1HFY17. The EBITDA margin fall poses a concern while the group expects this to be improving in second half at the back of investments. NPAT stood at $3.3 Mn in 1HFY18 as compared to 2.6 Mn, inclined by 27.7% on YoY basis. NVL expects to expand its market presence organically and inorganically to support overall growth in future. On the other hand, and despite a decent result; the group did not declare an interim dividend owing to the planned acquisition pipeline.

Meanwhile, NVL stock price has declined by 6.78% in last one month as on March 02, 2018. Given the few shortcomings and already high level of trading in terms of price to earnings ratio, we believe that the stock is “Expensive” at the current market price of $2.70


Performance in terms of Organic Growth (Source: Company Reports)

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