Pinned straw:
Monday 9th June 2025: I believe ARB Corporation has been sold off MOSTLY because of tariff concerns, because they manufacture their own products such as bull bars (a.k.a. "roo bars" here in Oz), canopies, roll bars, cargo barriers, spotlights, etc. in Melbourne, Australia and in Thailand; they also source product from China, especially for the US market which is their main growth driver currently, growth that has been accelerated by their acquisitions in late 2024 of the US-based Off-Road Warehouse (ORW) and 4 Wheel Parts (4WP) chains of stores. ARB are expanding those store networks into new states in the US as well as opening new stores in states in which they already operate.
Source: Page 16 of ARB's H1 of FY2025 Results Presentation: https://www.arb.com.au/wp-content/uploads/2025/02/FY2025-HALF-YEAR-INVESTOR-PRESENTATION.pdf
As you can see there (above), they have only just scratched the surface in terms of that expansion; it's still in its early stages.
If you only looked at ARB in terms of their Australian store network, you could view them as a mature company, but Australia, while being their home ground, is not where their main growth is coming from these days.
Yet, despite being a quality company that is profitable and growing, with good management who have skin in the game (6.04% of ARB's SOI are owned by Andrew and Roger Brown, the brothers who run the company, a share that is currently worth $158 million), ARB has been sold down significantly in 2025:
The selling actually started back in early October, so they've been in a strong downtrending channel for 8 months now. From $48 to $27 (-$21 or -44%) and they're still towards the bottom of that range - at around $31 to $32/share.
While it started 8 months ago, the ARB sell-down did however accelerate when Trump started throwing large tariff numbers around. To give you an idea of how brokers are viewing those tariff risks to ARB, here are some excerpts from FNArena.com today:
First, an overview of the calls (Recommendations) and Target Prices of the brokers that FNArena follow closely:
And here are the most recent updates from those brokers as summarised by FNArena - I have highlighted tarrif commentary in orange:
The following updates were back in February after ARB's H1 results were released and FNArena suggest that Macquarie, Morgans, and Morgan Stanley have not sent out any client notes or updates on ARB since then:
And below are the calls and target prices from the two "Other" brokers that FNArena cover less closely:
They have omitted Goldman Sachs who are listed below as having a "Neutral" call on ARB and a $38 Target Price on Feb 20th.
Wilsons (whose Feb update summary is highlighted in the green rectangle above) are the most bullish on ARB, however there are no updates listed from Wilsons since Feb 19th.
For those who may be interested, here's Commsec's breakdown of the "Subs" for ARB as at 25th July 2024:
Since then, we have seen AFIC (AFI, one of Australia's oldest LICs) enter the register on 14th March 2025 with 5.03% of ARB and we have seen some buying and selling from 4 of those other names above. Below are the latest moves from them:
- Bennelong sold down from 12.57% to 11.50% on 22nd October;
- MUFJ and First Sentier (First Sentier is regarded as a controlled subsidiary of MUFJ so it's the same position) bought and sold heaps (they have a history of loaning shares to shorters) and ended up with 6.08% of ARB on 23rd May 2025 (being their latest update); and
- State Street (one of the world's largest ETF providers) moved from 5.02% up to 6.07% on Feb 2nd.
Also, to be clear, Rogand Pty Ltd is ROGer and ANDrew Brown's private investment vehicle in which they hold their ARB shares. Both are directors of ARB and Andrew is ARB's MD. Their brother Anthony Ronald "Tony" Brown founded the company back in 1975 with ARB being his initials, however it is now run by Andrew and Roger Brown (So the ARB acronym could now stand for them instead of their brother Tony).
Below are some of the more important (IMO) metrics that I follow regarding ARB:
Source: https://fnarena.com/index.php/analysis-data/consensus-forecasts/stock-analysis/?code=ARB
They're not the best company on the ASX, but they're easily in my top 20 in terms of quality management and quality products, and they do have a moat, which is a superb industry reputation and loyal repeat customers.
Additionally they have another moat (competitive advantage) through their early involvement with OEMs (Original Equipment Manufacturers, in this case Utility Vehicles ["Ute"] and 4WD manufacturers) where ARB often design bull bars and other accessories for these vehicles either during the vehicle design stage or shortly after the vehicle design has been finalised, with the full cooperation of the OEMs, so not only is their gear recommended by the OEMs, it is often purchased by the OEMs to be fitted on certain models as either included or optional accessories when those vehicles are first sold.
Anyway, this straw isn't supposed to be a bull case for ARB, as I've done that already. This one is just to suggest that while the quality and management premiums look to have either partially or fully come out of the share price of ARB now, there is also the murky outlook around tariffs weighing on sentiment around this company.
And if you think that the US and China trade war is just beginning and is going to get a LOT worse and likely drag the whole world in - in terms of being a negative on global growth - then that probably makes sense.
If, on the other hand, you think that Trump Always Chickens Out (TACO) and the tariffs are either going to eventually settle at around 10% across the board, perhaps higher for China, or get scrapped altogether, then these levels may present a good entry point for companies like ARB who have clearly been caught up in the negative sentiment associated with the tariff impacts.
As has been commented on here many times, quality companies will likely trade at a decent premium most of the time, so when they do get sold down substantially on what looks like a temporary issue rather than a structural one, it can be a great time to build a position - or increase one.
Disclosure: I hold ARB shares, both here and in my SMSF.
Further Reading:
ARB Corp’s Making America Great(er)
from FNArena, Sept 11, 2024.
Plain Text Link: https://fnarena.com/index.php/2024/09/11/arb-corps-making-america-greater/
This story features ARB CORPORATION LIMITED. For more info SHARE ANALYSIS: ARB
The company is included in ASX200, ASX300 and ALL-ORDS
Analysts approve of ARB Corp’s two US acquisitions which are expected to build brand awareness and provide medium-term upside.
-ARB Corp announces US distribution and brand acquisitions
-Purchase of 4 Wheel Parts includes 42 retail aftermarket stores
-Canaccord Genuity sees no financial benefit until FY27
-The company’s Jeep product will be boosted by Poison Spyder
By Mark Woodruff, 11th September 2024.
Analysts seem pleased by ARB Corp’s ((ARB)) latest effort to widen distribution of 4WD accessories into the US, and, in a separate deal, pick-up a local US brand with more potential appeal to the US consumer than its own legacy brand.
Providing scale to the store network of the company’s US-based associate Off-Road Warehouse (ORW), the latter has entered a conditional agreement to acquire 4 Wheel Parts from private equity owned Hoonigan (formerly Wheel Pros) for -US$30m, subject to court approval.
4 Wheel Parts currently operates 42 retail aftermarket stores and associated e-commerce sites, selling 4×4 accessories across the US.
Ord Minnett believes ARB will invest between -$25-30m as part of the transaction and points out the company’s export sales will also benefit from increased investment in the Off-the Road Warehouse/4 Wheel Parts store network.
The company also has third-party distribution agreements in the US, Australia and numerous other export markets.
Apart from expanded distribution, Wilsons notes earnings drivers for ARB include the ongoing structural shift to SUVs, new vehicle model releases, and new product launches including in collaboration with original equipment manufacturers (OEMs).
More broadly, ARB develops, manufactures, distributes, and retails four-wheel drive vehicle accessories, necessitating manufacturing and warehousing facilities in Australia and Thailand, and an ARB-branded retail store network in Australia.
Retail is an important channel to market for ARB in the US market, explains Wilsons, in terms of sales generation and building brand awareness.
Already, ARB’s investment in Off-Road Warehouse provides access to a well-credentialed specialist retailer, note the analysts, and on favourable terms in relation to ARB brand representation.
Currently generating strong like-for-like sales growth, as highlighted by Wilsons, Off-Road Warehouse has recently opened an eleventh store.
Picking up on the point made by Wilsons on the importance of brand awareness, Citi suggests the expanded store presence and more prominent in-store ranging will be a significant benefit to ARB.
This broker also highlights ARB’s recent investments in its US distribution assets should assist with the likely scale-up in revenue. The Texas distribution centre has more than doubled in size and the company has also leased an additional distribution centre in California.
Easing concern over business familiarity and continuity, Wilsons highlights several former 4 Wheel Parts executives hold senior roles in both Off-Road Warehouse and ARB.
Canaccord points out Off-Road Warehouse’s primary owner Greg Adler had worked in 4 Wheel Parts from 1992 and was President and CEO until April 2018.
While expecting a positive share price reaction to the 4 Wheel Parts deal, Canaccord cautions the business has been in decline since its sale to Polaris Inc in 2016, and that decline has accelerated since it has been owned by Hoonigan.
Despite excitement over the increased store count for ARB, the analyst suggests it may take some time to turn this transaction into earnings, making a positive change to the broker’s FY25 forecast number unlikely.
On the other hand, Canaccord points out the purchase price for 4 Wheel Parts is less than the cost of setting up 42 stores, thereby providing Off-Road Warehouse with a significant buffer to make the deal work.
Should the acquisition be successful, Off-Road Warehouse will settle the purchase of the 4 Wheel Parts assets using additional funding provided by its shareholders, resulting in ARB increasing its shareholding in Off-Road Warehouse to 50% from 30%.
Effectively, the increase in ownership is a function of ARB providing greater contribution to the funding of the transaction than its current shareholding requires, explains Canaccord Genuity, noting it’s unclear at this stage how much of the US$30m ARB will contribute as part of the transaction.
A separate deal
In a strategically sound move, according to Canaccord Genuity, ARB will also buy the Poison Spyder brand from Hoonigan for -US$1m. The brand offers Jeep armor products to provide one’s Jeep with the necessary ‘armor’ to tackle any terrain.
In the US, ARB has been underweight Jeep product in the product portfolio, which hasn’t been an issue in Australia where Jeep is more of a niche brand.
Viewing this transaction in a similar light as the recently acquired 49%-stake in Nacho Offroad Technology (offering a range of innovative off-road lighting products), Citi notes management strategy is to acquire local US brands which resonate more with US consumers than legacy brands in Australia.
The move on Poison Spyder follows hard on the heels of ARB’s investment into a new US based R&D facility to support the development of localised products, points out Morgan Stanley.
Potential upside from ARB’s Off-Road Warehouse investment
Wilsons believes ARB is currently generating annualised revenue of between $5-7m from product sales into Off-Road Warehouse.
When the broker assumes similar store metrics and terms for the acquired 4 Wheel Parts stores, a further $25m of revenue could flow to ARB.
While a strong strategic transaction, Canaccord sees no material financial benefits until FY27.
Gaining control of Off-Road Warehouse would provide a significant medium-term tailwind for ARB Corp in Morgan Stanley’s view, via the opportunity to improve store performance and rollout potential.
This broker raises its target to $46 from $40.50 and upgrades the rating to Overweight from Equal-weight. ARB also makes Morgan Stanley’s list of key small/mid cap ideas post the August results season.
Not only is US distribution falling into place, but also OEM collaborations are taking shape, highlight the analysts. ARB is brand partner with Toyota on Trailhunter program launches (Tacoma and 4Runner), with another program coming up in FY25.
The arrangements with Toyota -and another with Ford- assist both distribution and brand position, explains Morgan Stanley.
This broker suggests the fruits of ARB’s strategic investments (in Australia but particularly in the US) will become more obvious in earnings numbers in FY25 and FY26.
Within the FNArena database where brokers are monitored daily, there are three Buy or equivalent ratings, two Holds and one Sell rating (Ord Minnett).
The average 12-month target price of these six brokers rises to $42.80 from $41.25 (though two are yet to refresh research post acquisitions) which is only -1% short of the ARB Corp share price at the close of trade on September 10.
Outside of daily monitoring, Wilsons and Canaccord Genuity are on Overweight and Hold, respectively, with an average target of $43.08. [on September 11th, 2024]
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Source: https://fnarena.com/index.php/2024/09/11/arb-corps-making-america-greater/
[11 September 2024]
And then, on April 4th:
Source: ARB-USA-Tariff-Update-04-April-2025.PDF
[04-04-2025]
That's what I'm talkin' 'bout.
Red Flag, or Opportunity?
Disclosure: I hold ARB.