Greencross (ASX:GXL)

Greencross is Australasia’s leading specialist retailer of pet food, pet products and operates Australia’s largest veterinary services business. Greencross’ strategy is to continue to consolidate the fragmented pet industry aiming for 20% market share.. Industry estimates state that Australia currently spends $8.7 billion on their pets ($2.5 billion on vet services, $4.5 billion on pet products and $1.7 billion on additional services). Pet associated product sales have outperformed the broader retail market over the past 5 years by 1.5%. GXC has been aquiring 1-2 veterinarian clinics per month, targeting an aquisiton price of 4x EBIT since 2010. The cost benefits of Greencross’ acquisition strategy will become more prevalent once centralised administration, supply chain efficiencies and cross selling are focused on by management. With an additional $90million of undrawn debt, strong EBIT debt coverage of 5 times and a PEG ratio of approximatley 1 the company is well positioned for growth. The market responded badly to the the recent departure of CEO Jeffrey David and the share price looks attractive in our view. Subscribe to our newsletter here: (VIEW LINK)