Automotive Holdings Group Ltd (ASX: AHG)

AHG Details

Selling Refrigerated Logistics business: Automotive Holdings Group was soaring with about 7% surge in stock price on November 23, 2017, at the back of the announcement to sell its laggard Refrigerated Logistics business to HNA International (HNAI) for A$400 million. The consideration will include A$280 million in cash and the assumption by HNAI of approximately A$120 million in finance lease liabilities related to said business. The sale, which is on a debt and cash free basis, is said to have followed an unsolicited offer at a value that is indicative of the business’ market leading position and any potential upside from profit improvement initiatives that AHG undertook in early 2017 under a restructuring program. Refrigerated Logistics’ FY2017 Operating EBITDA was of the order of $35 million and the business witnessed a strong start to FY2018 with improved trading.

The transaction, which is subject to the satisfaction of regulatory approvals and other customary conditions, is expected to be completed in the first half of 2018. For 12 months post sale, AHG will provide a range of transitional services including IT to Refrigerated Logistics. AHG will use the proceeds towards growth of its Automotive Retail operations, and to easily undertake any capital management initiatives.


Trading Update for first four months of FY2018 (Source: Company Reports)

On the other hand, group’s operating NPAT at the end of October was down 3.1% as the first four months of FY2018 were impacted by the regulatory changes to insurance income and subdued Western Australian market while Refrigerated Logistics had a better start. The group also indicated that FY2018 outlook is dependent on the timing of completion of the sale, while the group had earlier signalled for a modest uplift driven by expectation lingering on improving Western Australian economic conditions, cost reduction programs and ongoing improvement in Refrigerated Logistics. While some level of uncertainty is prevailing over the short term, the long-term prospects supported by resilient fundamental metrics over the years still look intact. We maintain our “Buy” recommendation at the current price of $ 3.70


AHG Daily Chart (Source: Thomson Reuters)

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