Vita Group Ltd

VTG Details
Response to media reports: Vita Group Ltd (ASX: VTG) suffered a set-back with its share price slipping by 21.2% on April 04, 2017. This has come as a blow to the company as there have been media reports doing the rounds about leak of information that relates to Telstra’s possible move to take back high performing stores from licensees, some of which are owned by VTG. Vita has responded to the articles publishing such news and has stated that the company is aware of an article published in the media titled, “Leak reveals Telstra's considering taking back high performing stores from licensees”, which refers to the contents of a ‘leaked’ Telstra internal ‘draft’ document. As per the article, Telstra (ASX: TLS) has identified a number of stores that it could take back control of by not going ahead with the renew of the Telstra Dealership Agreement (TDA) with licensees. On the other hand, a Telstra spokesperson is said to comment that the leaked information does not reflect the viability of any of the stores listed, and no decisions can be taken on individual Vita sites due to the nature of the agreement. Further, VTG understands that TLS does not have any plans to amend the arrangement with the Vita Group while all conversations with Vita and individual licensees are confidential.The two have known to share a strategic relationship for 22 years under a Master License Agreement and the same has been extended a number of times, and currently extends to 2020. Thus, any significant changes to the above are subject to mutual agreement. 

Interim Performance (Source: Company Reports)
 
Strong Interim Performance: Vita Group has otherwise reported for a strong performance for the six months to 31 December 2016 with 8% revenue growth from continuing operations to $344.1 million and 15% growth in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations to $35.0 million. The group reported for no net debt at the end of the half with significant flexibility to invest in growth opportunities. VTG also increased the interim dividend to 9.20 cps fully franked by 60% on the prior year. Given the prevailing situation, we maintain a “Hold” recommendation at the current price of $ 2.54


VTG Daily Chart (Source: Thomson Reuters)

St Barbara Ltd

SBM Details
Rise in cash balance: St Barbara Ltd (ASX: SBM) had reported its Q3 March 2017 quarterly updates entailing 64,916 ounces of gold produced at Gwalia in the quarter as per the FY17 guidance of 255,000 to 265,000 ounces; and a record 30,430 ounces of gold produced at Simberi. The group’s total cash at bank was of the order of A$99 million as at 31 March 2017 against 31 December 2016 figure of A$87 million after total debt repayments in the quarter of A$56 million. This came at the back of continued strong operating cash flow. SBM now stands debt free post the move on repurchasing the remaining US$20 million of Senior Secured Notes on 15 March 2017. 

Production Summary (Source: Company Reports)
 
SBM has also lately subscribed for 16 million ordinary shares of Peel Mining Limited (ASX: PEX) through a share placement at a price of 20.5 cents per share. This amounts to about $3.3 million of investment by the group and represents a shareholding of about 9.5% in Peel. SBM stock had fallen 4% in last five days (as at April 03, 2017) but surged about 5.4% on April 04, 2017 post the release of the production update. However, the FY17 guidance on consolidated production and mined reserve grade are slightly below expectations. Given the sector driven uncertainty on gold prices and overall trading scenario, the stock still looks “Expensive” at the current price of $ 2.53


SBM Daily Chart (Source: Thomson Reuters)

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