Why are Carsales.com (ASX:CAR) shares in the spotlight?

  • November 09, 2020 01:33 PM AEDT
  • Team Kalkine
    Team Kalkine
    Team Kalkine
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Why are Carsales.com (ASX:CAR) shares in the spotlight?

Summary

  • Carsales.com shares have delivered ~41% return in the last one year and nearly 18% in the previous three months, bringing them under the market participants’ radar.
  • The online automotive business is well-funded and has strong liquidity. The Company’s robust cash generation would help fund growth capital and dividends.

Carsales.com Limited (ASX:CAR) shares have been in the spotlight since they have witnessed a significant growth of 17.60% in the last three months and 40.82% in the previous one-year. The increase in the share price reflects both business performance and positive investor sentiment.

At AEDT 01:44 PM, CAR shares are trading at A$22.250, up 2.818% from the previous close. Carsales.com has a market cap of A$5.33 billion.

Carsales.com Limited provides world-class technology and advertising solutions. The Company is a leading online automotive business in Australia and is also expanding across Latin America and Asia. The Company made its ASX debut on 10 September 2009. From 14 October 2009 till 14 October 2020, Carsales.com has delivered strong shareholder returns of 556%.

A Quick Glance at FY2020 Results

  • Despite the COVID-19 impact in 2H FY2020, the business delivered growth across Domestic and International businesses.
  • Reported financial metrics were below the previous corresponding period majorly because of COVID-19 dealer support package.
  • Reported revenue, EBITDA and NPAT dropped by 5%, 5% and 9% respectively.
  • Final dividend remained flat compared to the pcp at 25 cents per share.

COVID-19 Response and Emerging Trends:

During the COVID-19 pandemic period, the business had three priorities - protecting its people, supporting customers and industry, and strengthening the business.

During this period, the Company noted strong growth in car ownership demand plus the platform traffic because of the below reasons:

  • Improvement in Online migration: COVID-19 led to an increased preference for online shopping. People preferred online shopping over traditional retail approach. In a CAR-conducted survey, it was found that 77% of the people chose shopping for their car online.
  • Alternative transport options: Due to the pandemic, people preferred using their cars instead of taking any public transport or using rideshare. Further, limited air travel also aided the surge in car ownership.
  • Government initiatives: Stimulus initiatives implemented by the Federal Government resulted in improved demand for vehicles.

How is the business positioned for growth?

CAR business is well-placed to continue providing long-term shareholder value via outstanding capability, coverage to global growth markets along with investment in new products and services.

The increasing international contribution is also supporting business growth. Presently, the international business contributes over 24% look-through revenue and 19% of look-through EBITDA. In FY2020, look-through revenue and EBITDA grew by 13% and 20% respectively.

Business Strategy

Carsales.com has three strategic priorities:

  1. Grow its leadership in digital automotive classified solutions for consumer & commercial customers.
  2. Build a robust ecosystem of services that assist dealers, OEMs, corporate & private customers through the buying, selling and ownership of vehicles.
  3. Using customer perceptions and industry trends to look for new prospects in core and adjacent markets, and beyond.

Key Observations - FY2021

  • CAR would focus on managing cost.
  • It would be investing in product and market-leading positions.
  • There are positive trends due to COVID-19 for the Company including constant digital adoption, and improved tendency for car ownership.
  • CAR’s business is well funded. The Company has strong liquidity, and the robust cash generation would help to fund growth capital and dividends.

 

 


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