Eclipx Group Limited

Downgraded FY18 NPATA Guidance: Eclipx Group Limited’s (ASX: ECX) stock tumbled 40.789 per cent on August 07, 2018 after the announcement of revised FY18 NPATA guidance which represents a cut down figure from the prior guidance harmed by sluggish auction activity at its GraysOnline. As per the release, the group now expects to report FY18 NPATA in the range of $77 Mn to $80 Mn, showing growth of about 13% to 17% against FY17. This revised guidance is below the previous expectation of between 27% and 30% growth. According to the management, its GraysOnline auction activity is being affected by a 10-year low in bank-initiated insolvencies in Australia and the current buoyant construction sector. Further, GraysOnline is now estimated to deliver about 30 per cent to 40 per cent NPATA rise on its pre-acquisition full year NPATA of approximately $8 Mn. While, Right2Drive’s result will be more moderate than previously expected, reflecting a more challenging environment from new competitor offerings by some auto insurers. We expect that the group will deliver a mid-single digit NPATA growth from Right2Drive and continues to look a significant opportunity in the relatively underpenetrated accident replacement vehicle market.

Besides this, the group has completed its implementation of the "Miles" Fleet and Equipment leasing platform in New Zealand and is now positioned to deploy this platform in Australia. Moreover, the group also successfully launched its “Nitro” customer portal platform across Australia and NZ which allows customers to have a single view of their fleet and telematics relationships with FleetPartners and FleetPlus delivering real-time data insights, enhanced driver safety, and overall cost efficiencies.

As of now, we maintain “Hold” position on the stock at the current market price of $ 1.800, considering aforesaid facts and presume that this has now factored in the stock price ahead of the lower earnings guidance for the full year.

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