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This top fund manager think Greencross Limited (ASX:GXL) is a buy

The Greencross Limited (ASX: GXL) share price has fallen significantly after revealing a trading update and a number of provisions and impairments that it’s going to make in its FY18 result.

The market smashed the share price down from $5.36 to $3.89, however it has recovered somewhat to $4.22 at the time of writing.

Whilst it was trading under $4 I thought it looked very good value, assuming those write-offs were just one-offs being implemented by a new incoming CEO.

I thought it was an interesting move that Lazard Asset Management increased its shareholding of Greencross at this lower price. It announced to the market that on 16 May 2018 it increased its shareholding from almost 6.1 million shares, to nearly 7.6 million shares. The share price finished at $4.33 on 16 May 2018.

Lazard Asset Management operates in 20 cities across 15 countries with over 750 staff and has US$226.1 billion in assets under management.

Greencross is currently trading at almost the lowest price it has done since 2013. Yet it continues to grow its revenue and increase its Greencross Vet and Petbarn store counts. The co-location strategy is continuing to be a success, although it will be rolled out at a slower speed.

Investors are rightly worried about competition from online retail, as well as the effect that other vet businesses like National Veterinary Care Ltd (ASX: NVL) could have on future profits.

Foolish takeaway

Greencross is currently trading at around 11x FY19’s estimated earnings with a handy grossed-up dividend yield of about 6.6%. If it can get back to growth then this value looks attractive for the long-term. If it stays around the current value I’ll be quite likely to buy more shares this year.

Another share I’m looking to top up on is this leader in the auto industry which is predicting profit growth of 30% in FY18.

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Motley Fool contributor Tristan Harrison owns shares of Greencross Limited and NATVETCARE FPO. The Motley Fool Australia owns shares of and has recommended Greencross Limited. The Motley Fool Australia owns shares of NATVETCARE FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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