AMA Group Limited

AMA Details

AMA Group Limited (ASX: AMA) provides auto repair & vehicle aftercare services, and accessories in Australia and New Zealand. The services offered include AMA Rapid non-structural damage repair, Conventional accident repair for Australia & New Zealand, Specialised prestige vehicle autobody, Fleet repair & maintenance, and Electric, Hybrid & Semi-Autonomous Vehicles. The company has a market capitalization of ~AU$411.82 million as on 1^st April 2021.

Result Performance – For the first half ended 31 December 2020 – (H1FY21)

For the first half ended 31 December 2020, the revenue increased by 19.3% to $434.2 million versus $364.1 million in H1FY20 due to the benefit of a full six months trading for acquisitions such as Capital SMART and ACM Parts. Normalization in H1FY21 was to the tune of $9.4 million in relation to the paint supplier termination fee. This fee was increased on the back of Capital SMART’s paint transition to BASF, which significantly completed. Further, EBITDA increased by 298.7% to $29.7 million versus $7.4 million in H1FY20 and EBITDA margin was reported at 9.0% in H1FY21 versus 5.1% in H1FY20. The company reported operating profit before interest and tax at $1.7 million versus operating loss before interest and tax at ($4.4) million in H1FY20. Finally, net profit after tax stood at $7.9 million versus net loss after tax of $8.6 million in H1FY20.  

Key Data (Source: Company Reports)

Recent Updates

As per the release dated 1 February 2021, the company appoints Carl Bizon as Chief Executive Officer after accepting the resignation of Mr. Andrew Hopkins.

Outlook:

The company has been working on strategies of expanding its business through organic and inorganic way. As a part of organic strategy, the company is focused to reap the benefit of unique value proposition in SMART (low severity) to Heavy Hit (high severity), continuous drive to expand geographic coverage, better-quality cost-effective repair resolutions, across numerous vehicle types. The steady rise in auto insurance market and Australasian car park offers a promising flow of opportunity for the company. The expansion of the Parts sourcing and distribution business is expected to benefit internal and external customers.

The acquisition landscape reports a pipeline of opportunities, where circa $100 million of near-term revenue could be achieved. The company’s strategy places it in a strong position to tap and grow in the existing market segment. It has been endeavouring to operational excellence to expand margin.

Following the massive vaccination programme undertaken and several fiscal and monetary stimulus provided, significant improvement in consumer as well as investors’ sentiment have been reported which in turn is likely to boost traffic volumes thereby helping company to increase its earnings and profitability in the upcoming periods.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Technical Overview:

Weekly Chart –

Source: Refinitiv (Thomson Reuters)

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

Having corrected beyond 50% retracement level of $0.556 from its high of $0.893, the stock gave stronger close for the ongoing week at $0.580, forming a ‘Hammer’ pattern thereby suggesting near-term bullish reversal for the stock. The technical indicator RSI with a reading around 38 and a curve at the end pointing up, suggests gaining of bullish momentum for the stock.

Going forward, the stock may have resistance around 20 periods SMA of $0.709 whereas support could be around the 61.8% retracement level of $0.477.

Stock Recommendation:

The stock has witnessed a fall of ~27.4% in 3 months and over the last 6 months, it has decreased by ~10.07%. In line with this, the stock reported a fall of ~13.4% in 9 months while increased by triple digit ~107.1% in 1 year. The stock has a 52-week low and high of AU$0.210 and AU$0.895, respectively.

Considering the aforesaid facts, we have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price which reflects a rise of low double-digit (in % terms). We believe the company can trade at a slight premium to EV/Sales Multiple (NTM) (Peer Average) considering its better liquidity position which could help the company in achieving its long-term growth objectives.

Considering the aforesaid facts, we give a “Buy” recommendation on the stock at the current market price of AU$0.580 per share, up by 4.504% on 1^st April 2021.

AMA Daily Technical Chart (Source: Refinitiv (Thomson Reuters))

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.