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APE - Eagers Automotive

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System

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A.P. Eagers Limited (APE) is an automotive retail group focusing on owning and operating motor vehicle dealerships which provide full facilities covering new motor vehicle sales, used motor vehicle sales, service, spare parts and the facilitation of allied consumer finance. APE's main operations are in South East QLD, Adelaide, Darwin, Melbourne, Sydney and the Newcastle/Hunter Valley region of New South Wales.

http://www.apeagers.com.au
 
What a company - and I only just realised with no commentary at all! Thought I would say something to acknowledge 100 anniversary.

There aren't many companies listed on the ASX that are as old as APE - it is celebrating its 100th year this year, which is nearly as old as the industry itself! It listed in 1957 and has paid a dividend every year since.

In March it reported a 38% increase in NPAT to $55m and EPS of 33.2c. 25% increase in dividend, which is the 11th consecutive year of increases. Unlike many other retailers, it has been relatively immune to the downturn in consumer spending as the high Australian dollar has made new cars the most affordable in 40 years.

At $4.91 with 15x P/E the company is looking fully valued but certainly not overvalued although one wonders where their growth can keep coming from.

But management is clearly very astute - they pulled off a $140m raid on fellow car retailer AHE which is now worth $200m less than a year later.

Of course, I bought and sold this twice for small profits without hanging on for the SP run :banghead: something I seem to be very good at doing...
 
This company is a bit of a mystery to me - I cannot really see a competitive advantage at all and the metrics seem to back this up (in the last two years there has been ROIC of 11-12% and before that it was under 10% for 2008-10). Margins are low.

They seem intent on ramping up their acqusitions funded by a mix of debt and equity in the last 10 years. And this makes sense as organic growth from car dealerships and after sales services is traditionally limited. It's not a scalable business, it's about owning the most turf to gain market share and to do that you need to keep buying new assets. Working capital costs are also very high as funds as tied up for long periods of time.

If you look at the 20 year chart there seems to have been a serious re-rating of this stock post-GFC - there has been a big spike in the last two years especially. Earnings growth has been high in these years too.

I am aware of Hesking's comments regarding the dollar and the stellar performance of car sales data over this period. I'm also aware that they have been expanding their ownership of dealerships pretty quickly.

EBIT from continuing operations for the 2013 FY will most likely come in at around $110m (based on their market guidance of 7.5% profit increase in June).

EV = $775m (market cap) + $520 debt (factoring in the acquisitions this half) = $1.3B

That's an EBIT / EV of 12! Is the current growth sustainable? How close are we to the top of the car industry cycle? What effect will the falling AUD have?

It looks pretty pricey to me - unless there is improved ROIC over time, this business needs a lot of capital to grow. :2twocents
 
Daily chart looking promising. Beware, this is very thinly traded but suitable for a medium term hold.

ape0105.PNG

Disclosure: I'm already holding some and considering buying more.
 
I am having a play with stopping volume and I found a good example via my scan.

After news SP dropped 8% then found some support @ $9.99 for a couple of bars then dropped again to $9.45.

If I was to trade this I would place order just above the $10 mark then look for the SP to rebounding a bit to cover initial drop in SP.

Thoughts??

upload_2019-12-1_14-28-10.png
 
Trav. said:
I am having a play with stopping volume and I found a good example via my scan.
Thoughts??
Click to expand...

It does have some appeal Trav.

The punter in me says the initial drop (forceful) just prior to this potential rebound will mean there should be some mini pushes in both directions before a reverse trend will/might be formed.

If the $9.55 level on the 26th Nov happens to get re tested over the next few days, it would represent a nice low risk entry. May never happen of course, but if it jumps to $10.30 quickly I think there will also be some resistance for a retest.

APE2dec2019.jpg
 
APE will be added to the ASX200 later in the year which should be good for it as it has recently failed to continue my BO hope and fallen through some support levels.

A couple of recent green bars has stemmed the bleeding so we will see if it can continue with a small recovery.

Holding a very small position on this one.

upload_2019-12-13_6-35-43.png


upload_2019-12-13_6-33-10.png
 
Back above $10 again. Hopefully APE can stay in this teritory (preferably above) for a while.

Directors have bought recently as well which shows some faith in company.

upload_2019-12-16_13-58-31.png
 
I can't take a trick here. Just when I think we are in for a good run this comes out. I'm sure that we will see a drop this morning.

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Trav. said:
Well that was a pleasant surprise. I truly expected and RED day following that announcement above.
Click to expand...

Lol … sometimes there is just no logic to the market … Speaking of Shorting … I remember years ago when Boral put a really poor announcement out on the state of the Company/profits etc, I thought I was going to make a killing on got on early (Short).

Can't remember exactly how much it went up that day but it was well over 5%:nurse: ….. Just another valuable/expensive lesson back then:grumpy:
 
I suspect the price rise is mainly due to the inclusion of APE in the index, it means ETF's have to buy parcels and in a tightly held business like APE that puts significant pressure on price. (another side of 'passive' investing risk that most have no idea of.)
 
galumay said:
I suspect the price rise is mainly due to the inclusion of APE in the index, it means ETF's have to buy parcels and in a tightly held business like APE that puts significant pressure on price. (another side of 'passive' investing risk that most have no idea of.)
Click to expand...
I think that they don't actually join until the 23/12 (post #8 above) but happy to take any reason for green.
 
On August 17th, 2020, A.P. Eagers Limited changed its name to Eagers Automotive Limited.
 
Eagers says it expects to post a record underlying operating profit before tax of $218.6 million for the six months ended June 30, versus $40.3 million for the lockdown hit prior corresponding period.

On a statutory basis, the NPAT from continuing operations is expected to be $267.4 million.

“The new car market continues to rebound from the initial onset of COVID-19 with a 28.3 per cent increase in the new car market compared with the first six months of 2020,” the company said. “These market dynamics are further buoyed by demand continuing to materially outstrip supply.”
Click to expand...

back above $16
 
For years APE was a very thinly traded stock with usually less than 100k in trade volume per day that paid dividends.
I held it for quite a few years from about 2008 .
It fitted my investment profile when I had a full service broker.
I sold when we started doing our own trades.
For some reason back in mid 20919 the volume in this stock absolutely took off, as the stock price got crunched from a high of 14.40 odd in September 2019 to fall to a low of a tad below 3 bucks in the early 2020 COVID crash.
Days of multi million volumes became the norm
Still has high trade days but has recovered to sit above 15 bucks.
Kinda keen on it, but not sure of the retail vehicle business model will make the grade.
Anyone have opinions on APE??
Mick
 
Obviously , no one else interested in APE, but I have been quietly accumulating some below$13 in a thin market.
APE will be the importer of the BYD vehicles from China, renamed Atto3 for Oz, so it may get a bit of a boost over the long term.
Its paid a regular dividend, sitting on a yield of 4.6 %, however it does have high levels of debt, and depending on its structure, may pose a problem if the RBA finally starts to raise interest rates.
Mick
 
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