Two stocks to park with you – South32 Ltd and Greencross Ltd

South32 Ltd

S32 Details
Acquisition of Metropolitan Colliery: South32 Ltd (ASX: S32) is acquiring the Metropolitan Colliery and related 16.67% interest in the Port Kembla Coal Terminal (PKCT) from an Australian subsidiary of Peabody Energy Corporation. This move from the group is a part of their strategy to invest in high quality mining operations for creation of value. Further, S32 intends to optimize the performance and unlock unique blending and resource synergies that include the potential development of the CCL724 mining lease containing a 71Mt Coal Resource adjacent to the Metropolitan Colliery. Moreover, the acquisition is fully funded via cash consideration of US$200M. Both the companies would share commodity price upside in the first year of production, or on a minimum 1.3Mt, if metallurgical coal prices exceed an agreed forward curve.

 

Upstream production and FY17 guidance (Source: Company Reports)
 
On the other hand, the production at its Illawarra Metallurgical Coal operation is affected by the temporary suspension of Appin Area 9 longwall and lower rates of production at the Appin Area 7 longwall. This is leading into a saleable production loss of over 500kt (as currently anticipated) and would translate directly to sales given low inventory levels. But, S32 is on track to achieve the unit cost guidance for the majority of the upstream operations in FY 17. S32 expects the capital expenditure of US$450M in FY17. Meanwhile, S32 stock rose 93.29% in six months (as of December 01, 2016) and still we give a “Hold” recommendation on the stock at the current price of – $ 2.83

 
S32 Daily Chart (Source: Thomson Reuters) 

Greencross Ltd

GXL Details
Rapid network expansion: Greencross Ltd (ASX: GXL) lately stated that the cross shopping is bringing benefit to its retail business while in-store clinics represent a rewarding opportunity. GXL is on track to open 32 in-store clinics by end of FY17. The group reported the revenue growth of 14% to $733.7 million in fiscal year of 2016 driven by growth in same store sales and network expansion. The EBITDA increased by 38% to $87.1 million and underlying EBITDA increased by 12% to $97.5 million. Overall, the EBITDA growth was impacted due to a subdued level of vet acquisitions in the second half and challenging retail conditions in Western Australia. As a result, GXL stock has fallen 14.54% in six months (as of December 01, 2016), On the other hand, the NPAT grew 82% to $34.6 million and the underlying NPAT was up 10% to $42.1 million. Additionally, GXL had added 21 stores, 23 clinics (including 14 in-store clinics) and 14 grooming salons in FY 16.

 

Customer spend (Source: Company Reports)
 
For FY 17, GXL expects the underlying EBITDA and NPAT growth to be at similar levels to FY16. We give a “Hold” recommendation on the stock at the current price of – $ 6.53

 
GXL Daily Chart (Source: Thomson Reuters)

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