Bapcor Limited (ASX: BAP)

Expansion plans well on track - Bapcor is one of the Australia’s leading provider of automotive aftermarket parts, accessories, equipment and services with a consistent strategy of specific, clear, measurable targets. It has completed the non-core asset divestments from Hellaby acquisition and received the proceeds of NZ$99 million. The Group successfully integrated Hellaby Automotive and still has a lot of potential to develop further. It opened one store in New Zealand and has added number of new stores in its target list. The Earnings are in line with the expectations and the group is delivering strong results.


Segment-wise Contribution of Revenue and EBITDA (Source: Company Reports)

It completed a Group conference and expo in Singapore with over 900 store managers, franchisees, suppliers, support staff and showcased the high potential of the group. It opened its first store in Asia and is planning to add five additional stores by December. The Group’s trading businesses are relatively protected due to the high service level. It is well placed to supply electronic components and batteries, especially through its electrical and electronics wholesale businesses.  Out of the total contribution from all the segments, 50 per cent contribution is from its trade that is focussed on supplying parts professionals to the workshops in Australia & New Zealand and 20 per cent contribution is from its Retail and Services as it supplies independent parts, accessories & 4WD and is bringing automotive aftermarket parts to Asia.

The group has been successful in growing its profit margins with a boost from store expansion and gaining more footprint across the globe. Group’s statutory revenue and net profit after tax for H1 FY18 increased by 41.6 per cent and 72.2 per cent, respectively compared to H1 FY17. Earnings per share for H1 FY18 was 14.61 cents per share, up 37.3 per cent as compared to H1 FY17. Net debt at 31 December 2017 was $337.1 million representing a leverage ratio of 2.2X. The Group continues to see growth in H2 FY18 from business synergies and store network growth as well as solid performance in underlying businesses.

Meanwhile, Paradice Investment Management Pty Ltd became the substantial holder of the Group since 14 May 2018 by holding 15,243,705 securities and 5.439 per cent of the voting power. Few of its directors like Margaret Anne Haseltine acquired 390 ordinary shares and Therese Anne Ryan acquired 422 ordinary shares for a consideration of $5.5547 per share under the Company’s Dividend Reinvestment Plan. It is ready to face any kind of negative consequences from the Amazon’s entry into the Australian online market place. Australia’s automotive sector is outperforming with a huge increase in the number of the buyers of both light and heavy commercial vehicles. In last one year, the stock has moved up by 28.8 per cent. We give a “Hold” recommendation at the current market price of $6.81 as the Company is performing well and is on track to achieve its targets through expansion plans and business synergies.

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