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Last edited 5 months ago
#Bull Case

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).

 
Last edited 5 months ago
#Bull Case

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.

 
Added 9 months ago
#Bull Case
stale

Strong moat from industry size and mechanic shop supply logistics

 
Last edited 9 months ago
#Growth Drivers
stale

Business Level

-Market size of "motor vehicle parts" within which "aftermarket parts" makes up some share is estimated at $5.2bn p.a. in Australia (IBIS World)

-With new car registration increasing @ 2.3% p.a the aftermarket parts industry is by no means a growth industry meaning the market size isn't expanding fast

-Therefore Bapcor's growth will be derived from capturing market share from competitors

-AGM 2018 presentation outlined plan on how they will do this; increasing store fronts over the next 5yrs

 
Added 7 days ago
#HY20 Results

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

 
Added 7 days ago
#ASX Announcements

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%

 
Added 4 months ago
#Acquisitions

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

 
Added 9 months ago
#Morningstar report
stale

Morningstar rate Bapcor a buy with a $7 valuation.

See here

 
Last edited 3 months ago
#Broker / Analyst Views

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.

 
Last edited 9 months ago
#Growth Drivers
stale

Macro level

-Growth in new registered vehicles 2013-2018: 2.3% (Australian bureau of statistics), although note a decline since 2003-2008: 3% (Australian bureau of statistics)

-Average age of cars 2015-2018 stable at: 10.5 years (Australian bureau of statistics)

-Im guessing the average age will increase with stagnation of wage growth currently putting pressure on consumers to hold off buying new cars. Aging cars will need repairs and replacement parts meaning increased demand for aftermarket parts

-Global aftermarket parts industry is projected to grow at 3% p.a out to 2030 (McKinsey & Co.)

 

 

 
Last edited 5 months ago
#Risks

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.