Automotive Retail Players in 2020: APE, BAP, SUL, PWH

  • Jan 17, 2020 AEDT
  • Team Kalkine
Automotive Retail Players in 2020: APE, BAP, SUL, PWH

New vehicle sales growth has been sluggish in Australia with 84,708 sales recorded during November 2019, depicting a fall of 9.8% on the prior corresponding period, according to VFACTS numbers released by the Federal Chambers of Automotive Industry (FCAI) on 4 December 2019.

Meanwhile, on a year-to-date basis, total sales for 2019 stood at 978,628 units, also 8.2% lower than the same period of 2018 at the backdrop of tighter credit availability, low consumer confidence, movements in exchange rates, slow wages growth, and extreme environment conditions (bushfires), all creating pressure on the retail sector.

Automotive market players are of the view that despite injecting some stimulus like incentives, sales and special vehicle editions, the appetite for new vehicles remains suppressed. On the other hand, with more than 60 brands and over 350 models, the Australian market is presently one of the most competitive in the world, offering a myriad of options to consumers, believes Mr Tony Weber, chief executive of the FCAI.

Good Read: 2020 Outlook for Australian vehicle sales – Lens on two major Vehicle Retail Stocks

Let’s look into the business, recent developments and stock performance of the following ASX listed automotive retail players that continue to stay ahead of the curve in adapting with innovative solutions to enhance customer experience.

A.P. Eagers Limited (ASX: APE)

A.P. Eagers Limited is engaged in the sale of new and used motor vehicles, distribution of related components and offers other services like vehicle servicing and parts, financing, leasing and extended vehicle warranties. The company acquired Automotive Holdings Group Limited (AHG) on 16 September 2019 and the executive management and operational leadership structure for the merged group was announced to the market in October 2019.

As a consequence of the challenging external market conditions, the company reported a 6% reduction in underlying operating profit before tax for the 10 months to 31 October 2019.

Leadership Changes: On 6 December 2019, the board of A.P. Eagers Limited announced the appointment of highly experienced automotive industry experts, Greg Duncan and David Blackhall, as independent non-executive directors, effective the same day.

Stock Performance: The market capitalisation of A.P. Eagers stood at around AUD 2.62 billion with ~ 256.93 million shares outstanding. On 17 January 2020 (AEDT 01:18 PM), the APE stock was trading at AUD 10.330, up 1.175% by AUD 0.120 with ~ 62,198 shares traded. So far, APE has delivered positive returns of 66.02% in the last one year and 1.09% in the past six months.

As per S&P Dow Jones Indices’ Quarterly Rebalance of the S&P/ASX Indices announced on 13 December 2019 (effective 23 December 2019), APE was added to the S&P/ASX 200 Index.

Bapcor Limited (ASX: BAP)

Victoria, Australia-based Bapcor Limited is engaged in the business of automotive parts retailing. It offers aftermarket parts, accessories, and services to customers across the country.

Source: 2019 AGM - CEO's Presentation

Acquisition Update: On 1 November 2019, Bapcor announced to have signed agreements to buy out Truckline and Diesel Drive, in line with its strategy.

Truckline is a heavy commercial truck spare parts business, boasts of an expansive network of 22 branches across Australia, along with distribution warehouses located in Perth, WA and Brisbane, QA. It has revenues of ~ $ 100 million and offers Bapcor an opportunity to expand its wholesale presence in the heavy commercial sector.

Diesel Drive specialises in the business of selling Japanese commercial truck spare parts, operating from a single location in Sydney, New South Wales with revenues of as much as $ 13 million.

With these additions, Bapcor’s existing footprint of Japanese commercial truck spare parts would be enhanced. The combined purchase price of both the businesses is around $ 48 million, to be funded from Bapcor’s existing debt facilities.

Stock Performance: Bapcor Limited has a market capitalisation of around AUD 1.85 billion with ~ 284.54 billion shares outstanding. On 17 January 2020 (AEDT 01:19 PM), the BAP stock was trading at AUD 6.475, down 0.231% by AUD 0.015 with ~ 271,716 shares traded.

The BAP stock has delivered positive returns of 7.81% in the last one year, 1.72% year-to-date and 5.70% in the last six months.

Super Retail Group Limited (ASX: SUL)

Super Retail Group Limited is a leading operator of retail stores network across Australia. The stores provide a large range of automotive parts and accessories, tools, camping products, gardening and outdoor equipment and boating equipment throughout Australia as well as New Zealand.

Source: Investor Day Presentation

October Trading Update: As per Super Retail Group’s trading update released in the month of October 2019, the Group delivered total sales growth of 4.2% and like for like sales growth of 3.2% for the first 16 weeks of the 2019-2020 financial year.

Source: Company’s October Trading Update

Macpac’s like for like sales represent refinements in the promotional and pricing strategy. The Group is confident about Macpac delivering shareholder value as new stores are opened, digital sales expand and brand awareness improves. The Group also informed that in response to a cautious consumer, they initiated a higher level of promotional activity across the business which generated top line growth, however, adversely affected the margin.

Stock Performance: Super Retail Group has a market capitalisation of around AUD 1.93 billion with ~ 197.54 million shares outstanding. On 17 January 2020 (AEDT 01:24 PM), the SUL stock was trading at AUD 9.760, down 0.102% by AUD 0.010, with ~ 409,348 shares outstanding.

SUL has delivered positive returns of 4.49% in the last three months and 1.66% in the last six months.

PWR Holdings Limited (ASX: PWH)

PWR Holdings Limited operates as a holding company for its subsidiaries that are engaged in designing and production of vehicle cooling solutions including radiators, oil coolers, intercoolers, and accessories for a global customer base.

FY19 Highlights: For the financial year 2019, the Group delivered a solid performance, on the back of investments made in people and equipment over the preceding 18 months. Despite a high capital investment program, PWR’s return on equity improved to 26.8%, up from 23.7% in the prior corresponding period.

The statutory net profit after tax (NPAT) also increased by 29% and there was a 17% increase in underlying NPAT to $ 14.2 million which was another record for PWR. The improvements in working capital management resulted in the EBITDA to cash conversion ratio of 102.9% and a strong cash balance of over $ 20.2 million as at 30 June 2019.

Given the results, the Board declared a final dividend of 6.9 cents per share, depicting an increase of more than 11% on the prior year final dividend of 6.2 cents per share; as well as a special dividend of 3.0 cents per share.

Stock Performance: With a market capitalisation of AUD 486.43 million and ~ 100.09 million shares outstanding, the PWR stock was trading at AUD 4.820 on 17 January 2020 (AEDT 01:29 PM), down 0.823% by AUD 0.040. PWH has delivered positive returns of 16.49% in the last six months and 4.29% in the last one month.

To support the regions and communities affected by the wind-down of the automotive industry in Australia, the government has been working on a couple of initiatives such as Automotive Transformation Scheme to promote competitive investment and innovation through to 2020, a $ 100 million Advanced Manufacturing Fund as well as a $ 155 million Growth Fund that offered assistance package to automotive workers and supply chain businesses during 2014 -2018.


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