Galaxy Resources Limited (ASX: GXY)
GXY Details
Mining Volume Increased: The Company released a Revised Definitive Feasibility Study for Sal de Vida that has supported a low cost, long life project with robust economics. The Company is currently in discussions with a range of parties in relation to potential offtake and strategic partnership opportunities and this revised the DFS estimates, which were upgraded to have post-tax net present value of US$1.416 billion at an 8% discount rate from US$1.043 billion at a 10% discount rate. The Company issued 900,000 unlisted options at an exercisable price of $3.66 on or before 1 May 2021 subject to various vesting conditions and were issued as incentives under the Galaxy Incentive Option Plan. The Company had US$60.8 million of cash balance as on 31 March 2018 and no debt. As set out in the March Quarterly Report, ASX advised that Galaxy’s classification has changed from a mining exploration entity to a mining producing entity. Accordingly, Galaxy is no longer required to lodge appendix 5B but will now be required to lodge preliminary final reports (Appendix 4E) and half-yearly reports (Appendix 4D) within two months of the end of the relevant accounting period.
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Galaxy Tenements (Source: Company Reports)
Operations at Mt Cattlin have continued without any Lost Time Injuries. A significant amount of work has been undertaken on systems improvement to support an expansion of Mt Cattlin. Total mining volumes increased significantly by 32% (in three months period ending on 31 March 18) over the previous quarter resulting in increased total mining costs included in production cash costs. As the industry continues to mature we are beginning to see the emergence of seasonal trends in both demand for lithium-ion battery products, such as electric vehicles, as well as in lithium pricing. The stock price was down by 15.67 per cent in the past six months with lithium price volatility while there was a speculation that the Group is looking for strategic options for its Sal de Vida operations, but the stock rose up by 5.5 per cent in the last week. It is worth noting that about 0.04 per cent of issued capital was reported as short sold (as per update for 4 May 2018). It is indicative of 15% of short position. We recommend to “Hold” the stock at the current market price of $3.3 (up 2.2% on May 07, 2018).
Vocus Group Limited (ASX: VOC)
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VOC Details
Increased Financial Capacity: Vocus NZ is an excellent business with strong leadership, an attractive growth profile, a clear competitive position and have a track record of delivering solid returns on capital. The Board concluded that it is in the best interests of shareholders for Vocus to retain the Vocus New Zealand business. Accordingly, Vocus has ceased all discussions with interested parties in the sale process. Although Vocus received multiple offers for Vocus NZ, in the Board’s view, none of these offers appropriately reflected the fundamental and strategic value of Vocus NZ nor provided sufficient certainty of funding and execution. The Board intends to continue to invest in and grow Vocus NZ to enable that business to realise its strategic potential for shareholders.
Expected Capex for FY 18 (Source: Company Reports)
Based on Vocus’s expected cash flows, including the final ASC project payment in H1 FY19, Vocus expects that its Net Leverage Ratio will peak in H1 FY19 and will organically reduce over subsequent periods. Vocus has continued to progress on its facility refinance plans and is in the process of finalising its appointment of several banks as joint Mandated Lead Arranger and Bookrunners (“MLABs”) to arrange a full refinancing of its debt facilities, including an extension of tenor, an upsizing of the facility and appropriate financial covenants. Vocus expects to complete its facility refinance by the end of the current financial year. The increased financial capacity and covenants that will be sought through the refinancing will provide sufficient financial flexibility for the Company to complete its strategic and transformation initiatives over the next few years. Since the start of the year, the share price was down by 14.9 per cent but witnessed a recovery of 6.9 per cent in the last week. The stock has experienced a short interest fall and reported for almost 0.26 per cent of issued capital as short sold. It is indicative of over 12% of short position. We recommend to “Hold” the stock at the current market price of $2.60.
Domino’s Pizza Enterprises Limited (ASX: DMP)
DMP Details
Challenges under the franchise sector: Domino's Pizza Enterprises Ltd is the largest pizza chain in Australia in terms of both network store numbers and network sales. It is also the largest franchisor for the Domino's Pizza brand in the world. Domino's Pizza Enterprises now extends across seven countries, with more than 2,200 stores and is the leading international Domino's franchisee. The Group issued 385 fully paid ordinary shares at an issue price of $40.58 each but were subject to Domino's Pizza Enterprises Limited Share Acquisition Plan Rules including 12 months trading restriction from each allocation date (which participant can extend up to 3 years). Recently, it was observed that one of the franchisees was put under the unfair pressure to split stores and was charging high fees for services and stock. It was later sold to an approved buyer. On the other hand, for the half year 2018, DMP’s network sales jumped up by 7.1% (+$82.8m) on the prior corresponding period (pcp) to $1,248.9m with over 4.0% of Same Store Sales (SSS). The share price was down by 13.57 per cent in the past six months and witnessed a recovery of 4.8 per cent in the last one month. The stock experienced a short interest and reported for 0.23 per cent of issued capital as short sold (as per the ASX report for 4 May 2018) and there are concerns on the ability to meet its guidance for FY18. At the moment, DMP has about 18% of short position. The stock looks “Expensive” at the market price of $ 42.0 and one can wait for a potential catalyst.
Network Sales Growth excluding Germany (Source: Company Reports)
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