Active Member Straws
#Bull Case
stale
Last edited 6 months ago

A business led by one of the best management teams on the ASX, Bapcor's autoparts distribution business offers defensive earnings and good growth potential.

A combination of savvy acquisitions, material efficiency gains and network roll-out have underpinned outstanding per share earnings gains in recent years, and I expect growth to remain in the upper single digits range for many years to come (on average).

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#Bull Case
stale
Last edited 7 months ago

This straw has been flagged as stale, but nothing has changed my opinion.  The companies report was very strong in August and only solidifies the following thesis:  This is a fantastic defensive, longterm investment.  Having expanded it's footprint here and in New Zealand with good acquisitions, this well run company can only continue it's steady growth.  A company that wll allow good night sleeps.

Again, I'm refreshing this straw with nothing changing the thesis.  They have even moved into the SE Asian market, giving it more potential income.  There may be theething pains, but that's to be expected.  Solid long term investment.

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#COVID-19 Update
Added 2 weeks ago

Bapcor has provided a business update for the period since H1 results were released on January 20.

In that period, Bapcor said its core trade segment have continued to be strong with same store sales up 5% and gross margin improvement. Likewise, the retail segment has experienced "good sales growth", with trends from the first half continuing for other segments. On this basis, the company is on track to meet its full year guidance.

That being said, with store closures and lockdowns the company said it's not possible to forecast how the business will perform for the remainder of the year, and so the company has removed any FY guidance.

Shares have so far fallen ~50% since the current crisis began. At the half year, the business had ~$43m in cash and $441m in long term debt (comprised of multiple tranches that don't begin to expire until 2022)

I expect the trade segment will hold up relatively well, but that retail will suffer a lot more. Although worth noting that Retail represents just 16% of total group EBITDA.

I estimate that FY20 EPS will be roughly 30cps, which puts BAP on a forward PE of ~11

ASX announcement here

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#HY20 Results
Added 2 months ago

Bapcor just keeps getting it done. 

For the half it saw revenue rise 10.4%, while NPAT increased 5.9% (pro forma). The dividend was lifted by 6.7%

All segments made good headway -- even retail moved forward (3.1% increase in EBITDA). The continued expansion of their network looks to be proceeding well, with Thai stores mostly EBITDA positive in December. Gross margins improved slightly too.

The business has $43m in cash, but the debt to equity has increased to 59% (due to acquisitions).

Not a business that is likely to see fast growth, but I expect it to steadily grow at a decent rate in the years ahead. Have slightly increased my valuation.

Results presentation is here

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#ASX Announcements
Added 2 months ago

12 February 2020

RECORD REVENUE & EARNINGS

Revenue of $702.5M, up 10.4%

Pro-forma EBITDA (excluding AASB 16)of $79.4M, up 4.6%

Pro-forma Net Profit after Tax(excluding AASB 16) of $45.3M,up 5.1%

Pro-forma Earnings Per Share(excluding AASB 16) of 15.94 cents per share,up 4.0%

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#Acquisitions
Added 5 months ago

Bapcor has signed agreements to acquire Diesel Drive and Truckline.

Both businesses provide spare parts for trucks, and will augment the existing speciality warehouse division.

Truckline generates around $100m in sales, while Diesel Drive earned $13m in revenue last year.

The combined price is $48 million, which will be funded from existing debt facilities. It will increase their debt by around 12.6% and leaves the debt to equity at ~64%

Bapcor reckons they'll get a 15% retunr on investment for these purchases, and boost per share earnings in their first full year of operation.

This is a team well practiced at making value creating acquisitions, and is consistent with their startegy. Bapcor is now uniquely positioned to provide aftermarket parts to all forms of road transport.

Full announcement here

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#Broker / Analyst Views
Last edited 4 months ago

31 May-2019:  Credit Suisse rates BAP as "Initiation of coverage with Outperform"

Credit Suisse initiates coverage on Bapcor with an Outperform rating and $6.95 target. The company has achieved private-label penetration of 24% across Australia's trade and retail markets.

 

The broker considers the successful execution of the company's strategy and the roll-out of around 50 stores implies at least 16% of embedded growth over and above FY19 estimates.

 

The broker believes the de-rating of the stock has been driven by concerns around near-term momentum. Hence, a valuation gap has emerged.

 

Target price is $6.95 Current Price is $5.96 Difference: $0.99
If BAP meets the Credit Suisse target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $6.98, suggesting upside of 17.1% (ex-dividends)

The company's fiscal year ends in June.

 

Forecast for FY19:

Credit Suisse forecasts a full year FY19 dividend of 17.17 cents and EPS of 33.36 cents.
At the last closing share price the estimated dividend yield is 2.88%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 17.87.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 33.6, implying annual growth of -0.9%.

Current consensus DPS estimate is 17.8, implying a prospective dividend yield of 3.0%.

Current consensus EPS estimate suggests the PER is 17.7.

Forecast for FY20:

Credit Suisse forecasts a full year FY20 dividend of 18.37 cents and EPS of 36.36 cents.
At the last closing share price the estimated dividend yield is 3.08%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 16.39.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 37.3, implying annual growth of 11.0%.

Current consensus DPS estimate is 19.7, implying a prospective dividend yield of 3.3%.

Current consensus EPS estimate suggests the PER is 16.0.

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#Risks
stale
Last edited 6 months ago

Electric cars

The rise of electric cars is seen as a negative by many for Burson; after all, they require less parts and tend to be longer lasting.

Nevertheless, even with a strong adoption rate, it will be many years before electric vehicles become a major part of the market.

And, of course, Burson is well placed to supply what parts are needed.

So, for me, this is not a huge risk.

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