Greencross Limited

GXL Details

Greencross has suspended the operation of its dividend reinvestment plan (DRP) until further notice and the DRP will not apply to the upcoming final dividend for FY2017. The company will release its FY2017 full year results on 22 August 2017. Recently, Animates (Company operates under the brand name of Animates in New Zealand) has completed the acquisition of four veterinary clinics in Auckland for cash consideration of NZ$4.1 million, and these clinics are located inside the Animates retail stores at Botany, Glenfield, Henderson and Takanini. The clinics are expected to contribute annualized revenue of over NZ$3.3 million and annualized EBITDA of approximately NZ$0.6 million. Following the acquisition, currently, Animates network in New Zealand comprises 15 veterinary clinics and 39 retail stores. In addition to the 4 in-store clinics acquired in Auckland, the company has opened 8 in-store clinics in FY2017, while 10 in-store clinics under construction. As a result, Greencross now expects to add a total of 22 in-store clinics to its network in FY2017, which will bring the total number of in-store clinics across Australia and New Zealand to 39. Greencross has opened a further 3 stores in H2 FY2017 at Woolloongabba (QLD), Invercargill (NZ) and Whanganui (NZ). Further, it has opened 19 retail stores, so far in FY2017, bringing the total number of retail stores in the network to 240.

The stock has declined 23.3% in past three months, owing to recent recall of its pet products. The company continues to expect strong cashflow conversion in FY2017 with underlying EBITDA and NPAT growth at similar levels to FY2016. Given the modest performance despite increasing competition during H1FY17, we give a “Buy” rating on the stock at the current market price of $ 5.71


GXL Daily chart; (Source: Thomson Reuters) 

Galaxy Resources Limited

GXY Details

Galaxy Resources Limited (ASX: GXY) has paid a further royalty of $0.5 million to Red 5 Limited for production from the Mt Cattlin mine in WA for the March 2017 and December 2016 quarters. Red 5 Limited (ASX: RED) owns the right to receive a royalty of $1.50 per ton of ore processed from the Mt Cattlin mine in Western Australia which is owned and operated by Galaxy Resources Limited (ASX: GXY). Red 5 previously received an amount of $1.7 million from Galaxy Resources for the period of May 2011 to January 2013 before the Mt Cattlin operation was placed on care and maintenance. The Mt Cattlin mine re-commenced processing operations in 2016 and Red 5 has now received a payment of $0.5 million, for production royalty entitlements for the March 2017 and December 2016 Quarters. Recently, Galaxy Resources has stated that it will ramp-up production at Mt Cattlin to a throughput rate of 1.6Mtpa of spodumene (lithium concentrate) and tantalum, based on a total reported resource of 16 million tons of spodumene and tantalum.

Of late, Galaxy Resources has dispatched its first shipment (13,815 wet metric tons) of lithium concentrate from its Mt Cattlin mine under 2017 contract terms. However, the mica content of lithium concentrate is observed at 1.38%, and which is much below the contractual terms with clients. The MV Belle Ocean shipment is the first under 2017 contract pricing terms of US$830 per ton at 5.5% grade lithium concentrate with option of increasing to US$905 per ton for 6.0% grade equivalent.  Meanwhile, the stock has tumbled 28.8% in the last one month owing to low quality lithium concentrate at Mt Cattlin. However, we believe that the long-term demand prospects are still optimistic for Galaxy’s products and the final pricing of its supplies are based on the grade and moisture content.We give a “Hold” recommendation on the stock at the current market price of $ 1.65


GXY Daily chart; (Source: Thomson Reuters)

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