Greencross’ FVE Cut to AUD 6.50 on Slower Retail Expansion, But Shares Remain Attractive
We’ve cut our fair value estimate for no-moat Greencross by 19% to AUD 6.50 per share after transferring analyst coverage, but we still believe the stock is undervalued. While we now expect a slowing retail network expansion, a higher price tag on future acquisitions, and increased capital costs associated with store renovations, we have also reduced our fair value uncertainty rating to medium from high, to reflect the resilient nature of industry demand and Greencross’ dominant market position....Greencross is a pet care company providing veterinary services. Co. provides a network of retail stores, veterinary clinics, grooming salons and dog-wash facilities across Australia and New Zealand. As of June 30 2016, Co. had over 220 stores operating under the brands Petbarn and City Farmers and over 150 clinics including general practices, specialty and emergency centres. Co. also provides a range of additional pet care services such as crematoria, pet adoption, puppy behavioral training, pet insurance and pet hotels. In addition to selling pet food and accessories via its store and clinic network, Co. also has an online business serving the Australian and New Zealand pet care market.
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