Bapcor Limited ASX:BAP

• Steady car and trucks parts business - operates mainly in Australia, but has international operations in NZ, Thailand. Acquired 25% of Singaporean listed entity Tye Soon, giving them indirect exposure to the Singaporean, Malaysian and Korean market.
• >90% of revenue derived from their Trade and Specialist Wholesale divisions - which are non-discretionary in nature (evident through Covid - saw record financial performances across all segments).
• Listed in 2014, and has since performed steadily. Operating on 46% gross margins. Consistent share count. Current ratio 1.9x, Quick ratio 0.6x, total debt/equity 41%.
• ROE and ROIC > 10% consistently.

Growth outlook

• Long term CEO Darryl Abotomey has just announced that he is retiring in Feb 2022, but will stay on to June 2022 to help with transition. He has been with Bapcor since 2011, overseeing their listing and taking their company on this steady growth journey. He still holds 1.4m shares. Quite a surprise announcement, considering the board extended his contract to 2023 just a few months prior.
• From what I can see, management has focused on the longer term and have proven to be nimble operators. Many initiatives to consolidate their position as the leader parts distributor in the region include:

1. Growing store footprint, growing online offering and increasing store white label products (aiming for 40%)
2. Leveraging group logistics capability and store networks (probably one of their biggest competitive advantage)
3. Utilising scale to deepen supply relationships
4. New Tullamarine distribution centre - much more efficient, and will reduce operating costs significantly in the long run. Plans to build a similar facility in Brisbane in the near future.

Thoughts

• BAP is one of the first companies I bought years ago, and one of my larger holdings in RL. Consistent, reliable, resilient business - not a sexy business, just one trucking along year after year. They have benefited from Covid, through increased second-hand car sales and more people doing local road trips / driving to work. As the economy reopens, I think certain parts of this business will be negatively impacted but I believe this company is worth holding for many years to come. I am confident management will rally around whoever comes in to take over from the retiring CEO.