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GXL - Greencross Limited

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Re: GXL - Greencross

I bet the Petbarn people don't see it that way.;). They said they won't sell until after FY14 results are out. I wonder where the SP will be by then.
Well I cannot see into the future but what I can see presently is that the stock has risen (in the past year) by just more than 140%;). However more than doubled in price since this time last year, the P/E is nearly 40 suggesting it is getting very expensive.

140124 - GXLs.gif
 
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Re: GXL - Greencross

Well I cannot see into the future but what I can see presently is that the stock has risen (in the past year) by just more than 140%;). However more than doubled in price since this time last year, the P/E is nearly 40 suggesting it is getting very expensive.
Very expensive which is why im contemplating just taking profits and walking away happy, I bought at the 3.50 range
 
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Re: GXL - Greencross

16/06/2014
Today Greencross has advised it has agreed to acquire 100% of the equity in City Farmers, an Australian store with 42 outlets Australia Wide, including 21 in WA.

To be funded through fully underwritten equity raising, a placement to the vendors and a drawdown from a resized debt facility.

The aquisition is expected to be completed by the 17th of July 2014.

I prefer the City Farmers outlets compared to the Petbarns so hopefully they'll keep them seperate
 

TPI

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Re: GXL - Greencross

16/06/2014
Today Greencross has advised it has agreed to acquire 100% of the equity in City Farmers, an Australian store with 42 outlets Australia Wide, including 21 in WA.

To be funded through fully underwritten equity raising, a placement to the vendors and a drawdown from a resized debt facility.

The aquisition is expected to be completed by the 17th of July 2014.

I prefer the City Farmers outlets compared to the Petbarns so hopefully they'll keep them seperate
I read this, I think they are paying $215M for a business that generates $20M EBITDA, isn't that a bit pricey?

With a dilutive capital raising to help partially fund it.

Hopefully ROE won't drop too much as a result.
 
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Re: GXL - Greencross

Great comments McLovin / Craft and SKC on this one. Spent a bit of time looking at GXL and GEM over the weekend, a big "pass" on both, came to the same conclusion. Even in light of SP pullbacks, they don't make sense to me (as a long term holder).
 

tinhat

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Re: GXL - Greencross

There's been quite a bit of negative sentiment here over the past few years over this company and its growth through acquisition strategy. Although ROA and ROE have reduced significantly over the past few years, EPS has more than doubled. I haven't looked into this company closely, but on the surface the growth strategy appears to have paid off so far.

The chart is certainly looking interesting. A head and shoulders with the first shoulder forming from Nov 13-May 14, the head between May-Dec 14 and the second shoulder between Dec-May 15. Note that the second shoulder contains its own head and shoulder formation. If we expect that the second corrective wave down has the same range as the first, the price is close to bottoming in the low $6 area.

I would be interested to hear thoughts from anyone who follows this stock.
 
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Re: GXL - Greencross

A problem with GXL's Vet acquisition strategy is that they're buying small practices where the owner (and frequently the owners spouse) work long hours at less than market rates. It's a calling, a lifestyle and an obsession. For vets, selling out to GXL is a fabulous exit opportunity. No more working 80 hrs while being paid for 40. Yay!

But there's a big difference between putting unpaid weekend hours into your own business versus someone else's.

Seems to me it's likely the financials of the practice will steadily erode once GXL buys it, the prior owner banks his cheque and eventually wanders off.
 

tinhat

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Re: GXL - Greencross

A problem with GXL's Vet acquisition strategy is that they're buying small practices where the owner (and frequently the owners spouse) work long hours at less than market rates. It's a calling, a lifestyle and an obsession. For vets, selling out to GXL is a fabulous exit opportunity. No more working 80 hrs while being paid for 40. Yay!

But there's a big difference between putting unpaid weekend hours into your own business versus someone else's.

Seems to me it's likely the financials of the practice will steadily erode once GXL buys it, the prior owner banks his cheque and eventually wanders off.
Very interesting thoughts. A very interesting business model of both vertical and horizontal integration but alas I doubt I have the time to investigate it as much as I need to to make an investment decision. It's got to be a growth industry. It's got to be one of the more inelastic consumer discretionary sectors. As such I imagine there must be all sorts of synergies and value-add opportunities available to providing full life-cycle services and products. I look forward to reading their next report.
 
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Re: GXL - Greencross

Geeze they stuffed that raid up. Got 2.3% after looking for 15%... Should have nibbled on market for a few days
 

skc

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Re: GXL - Greencross

Geeze they stuffed that raid up. Got 2.3% after looking for 15%... Should have nibbled on market for a few days
Why would someone sell to them? A 'financial buyer' is a private equity fund right?! Who else can it be? And why else would a buyer want 15% if he/she didn't have more grand plans?

I had a tiny few long which I bought when GXL was first mentioned as a potential target in the AFR. I closed the position yesterday as it didn't move much and the overall market looked like it wanted to puke anytime (still does).

Yup... I am a professional trader with impeccable timing! :banghead:
 

Ves

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Re: GXL - Greencross

Not sure I really understand what private equity could achieve with this business?

It's already pretty highly leveraged (around 3x EBITDA - based on 2015 earnings and debt).

I assume the vet business & pet shop businesses have pretty high fixed costs, so cutting them too deep might end up being a disaster (or not possible at all).

Not sure they could create synergies easily with an overseas business they already own either due to the geographic distance and the business model itself (although it may be possible for EBOS in New Zealand). This is especially the case for the Vets business, as most centres by their very nature are pretty decentralised, and I suspect it'd be hard to add much value in the distribution channels.

Any ideas?
 

skc

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Re: GXL - Greencross

Not sure I really understand what private equity could achieve with this business?

It's already pretty highly leveraged (around 3x EBITDA - based on 2015 earnings and debt).

I assume the vet business & pet shop businesses have pretty high fixed costs, so cutting them too deep might end up being a disaster (or not possible at all).

Not sure they could create synergies easily with an overseas business they already own either due to the geographic distance and the business model itself (although it may be possible for EBOS in New Zealand). This is especially the case for the Vets business, as most centres by their very nature are pretty decentralised, and I suspect it'd be hard to add much value in the distribution channels.

Any ideas?
Not too sure but as mentioned in this AFR article, plenty of Private Equity outfits have a pet-related business in their stable. Is running a chain of vet surgeries that different to say running a network of hospitals in terms of economies of scale and synergies? Perhaps there are better buying power (in clinical supplies), better human resource management (rostering of vets), better brand value etc etc? Another thing GXL has done is to double every vet surgery as a pet store.. leveraging the space and foot traffic. The question is, how much is left for the would be acquirer to further exploit?

What I found interesting was that two of the bigger acquisitions made by GXL (City Farmers and Mammoth Pet Holders) were sold to them by Private Equities. It seems odd that they'd want it back so quickly?!

http://www.afr.com/street-talk/credit-suisse-in-market-for-greencross-stock-20151217-glqe5y
 

ROE

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Re: GXL - Greencross

interesting announcement today
they team up to buy this baby cheap and screw retail holders.

so they team up with founder and various willing parties and form a separate entity to bid for GXL
I assume these willing parties will have an economic interest in this new entity

so they have the upside but current holder get none.

it ain't going to fly I dont think, they need to bid north of $8 for anyone to seriously consider
especially long term fund managers.

I got in between 4 and 5 but I aint selling for less than $8, I just got some more today at $6.50

I think the floor price has been set around around $6 regardless of what is happening for the next
6 months at least.
 

skc

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Re: GXL - Greencross

interesting announcement today
they team up to buy this baby cheap and screw retail holders.

so they team up with founder and various willing parties and form a separate entity to bid for GXL
I assume these willing parties will have an economic interest in this new entity

so they have the upside but current holder get none.

it ain't going to fly I dont think, they need to bid north of $8 for anyone to seriously consider
especially long term fund managers.

I got in between 4 and 5 but I aint selling for less than $8, I just got some more today at $6.50

I think the floor price has been set around around $6 regardless of what is happening for the next
6 months at least.
The announcement made it sounds like they are going to report something pretty solid tomorrow. Let's see what those numbers are.

The PE funds have made 3 attempts already so clearly they are keen. But it's a long way from $6.75 to $8 unless there are some takeover tension.
 

ROE

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Re: GXL - Greencross

Decent result out bye bye at this take over price -:) ... I bought yesterday for that reasoning ... Outright rejection of take over approach several time mean they have decent result up their sleeves
 

ROE

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Re: GXL - Greencross

Another decent result, exactly how I like it, reducing debt slowing, fund expansion via cash flow and margin increase

Another long term hold but the market doesnt agree with me :)
 

skc

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Re: GXL - Greencross

Another decent result, exactly how I like it, reducing debt slowing, fund expansion via cash flow and margin increase

Another long term hold but the market doesnt agree with me :)
I had to dig a bit to find what explain the large differences between reported and statutory NPAT....and they thought they'd hide this on the last page of the presentation as appendix.

Capture.JPG

With the exception of the $2.7m acquisition and defence costs... it's hard to tell if the other costs are should actually be excluded from "underlying" performance?! Terms like integration and restructuring costs are such generic accounting bucket for unwanted costs...
 

ROE

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Re: GXL - Greencross

I had to dig a bit to find what explain the large differences between reported and statutory NPAT....and they thought they'd hide this on the last page of the presentation as appendix.

View attachment 67849

With the exception of the $2.7m acquisition and defence costs... it's hard to tell if the other costs are should actually be excluded from "underlying" performance?! Terms like integration and restructuring costs are such generic accounting bucket for unwanted costs...
Maybe a once off to do with staff movement due to them taking full control of logistic and supply chain in house?
 

ROE

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Oh yeah baby give it to me
Debt down, revenue up, margin up another good combo following ITD result

 Revenue up 14% to $412.3 million
 Gross margin (%) strong at 55.6%
 EBITDA up 14% to $51.4 million
 Underlying EBITDA up 11% to $53.9 million
 NPAT up 17% to $21.9 million
 Underlying NPAT up 9% to $23.0 million
 EPS up 15% to 19.0 cents
 Underlying EPS up 7% to 19.9 cents
 Interim dividend up 6% to 9.5 cents per share
 Net debt down $5.1 million to $222.8 million

4.3% LFL sales growth across the Group that what I like to see better than inflation grow is good
 

skc

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Just a little example of how tiny little bit of news can offer trading opportunity. Last Thursday GXL announced the full year result release date and the suspension of DRP. Sounds like a very innocent, non-price sensitive news, doesn't it?

But it pricked my interest because:
1. GXL has been sold off along with other retail stocks on the Amazon threat and general tightening of consumer spending.
2. The stock has consolidated for 3 weeks around this low level and refused to go lower.
3. If trading has been poor, this would have been an opportunity to make a market update. So in this sense no news was good news.
4. DRP suspension may also be interpret as not negative for cash flow.
5. Overall retail sector has also stopped free falling for now.

So it was a simple case of buy the breakout of the little consolidation, which happened today (or for the more aggressive, just buy the news last Thursday).

Capture.JPG

Obviously it could all be wishful thinking and unravel tomorrow... so the usual risk management (position sizing and stop placement) applies.
 
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