Australian (ASX) Stock Market Forum

ARB - ARB Corporation

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Not a huge volume day today following the announcement but another step in the right direction

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ARB has been on a long and IMO ludicrous run for months, but does anyone have any idea what triggered today's 13% fall in price?

I've held this for years, including one episode where I sold out and bought back in for very slightly less than I'd sold at. Since then I grit my teeth and hold on through its occasional bursts of volatility. I expect to do that again this time, unless there's a real change in the company or the business.

Thanks
 
ARB is one of the many that I've missed and it's having a great run if you're a holder. We'll never know for certain why investors sold a little today. It could be that they've taken the opportunity to realise some profit. I could posit that half the adult population were buying online stuff for the house and the other half were buying stuff for their cars and SUVs while being restricted to home. Now that restrictions are easing and there's a vaccine likely, people won't be at home as much. Online sales are anticipated to drop.

A see a similar fall in SUL (Super Retail Grp) today. KGN (Kogan, and TPW also fell significantly today.
 
Its across the board in all the businesses that were grossly overpriced based on the unit economics in the pandemic. The news of a potential vaccine possibly being closer than previously caused market participants to swing from these into businesses perceived as being beneficiaries of an end to lockdowns and restrictions. Look at SYD.
 
ARB advises that it achieved unaudited sales revenue of $284 million for the half year ended 31 December 2020 which represents growth of 21.6% compared with the prior corresponding period. Based on preliminary, unaudited management accounts, the Company’s profit before tax for the first half is within the range of $70 million to $72 million, inclusive of $9.8 million of non-recurring government benefits.

The Company maintains a positive short-term outlook based on a strong customer order book and another record sales month in December 2020. However, the Company’s first half performance should not be used as an indicator for the second half of the financial year, for which no guidance can be provided, as it remains far too uncertain to predict in the current economic climate.

ARB expects to release its results for the half year ended 31 December 2020 on Tuesday, 16 February 2021.
 
6 months later.. keep text, change numbers....

ARB advises that it achieved unaudited sales revenue of $623 million for the financial year ended 30 June 2021 which represents growth of 33.9% compared with the prior year. Based on preliminary, unaudited management accounts, the Company’s profit before tax for the financial year is within the range of $145 million to $150 million.

The Company maintains a positive short-term outlook based on its consistently strong customer order book. ARB is focused on managing input costs and global supply chain pressures whilst pursuing various market opportunities. The current pandemic and economic conditions remain very uncertain and it is not possible to provide financial or operational guidance beyond the short term.

ARB expects to release its results for the financial year ended 30 June 2021 on Tuesday, 17 August 2021.

- should lift today. $20 a year ago, $30 six months ago, and above $40 now
 
I was too greedy with this one, looked very hard when it was around $15 2 years ago and just couldn't build enough conviction to take a position. Expensive error of omission!
 
@Dona Ferentes you have been a share holder since 2010? I feel stupid not buying in late 2014, all of 2015, all of 2016 and was convinced that I missed the boat in 2017. Took a small position (& DRP) in late 2018. Now I feel so dumb being so conservative with my initial purchase. I regret not going in big back. I had no funds during April and May 2020. Was pleasantly shocked to see ARB do so well last year and this year. I feel I should just hold. I see so many utes. So many of my friends have utes.

The same young dumb males who use to work on their commodores and falcons, are older with a bit more cash now - lets put more things on our utes to show off our male (insecurities??) ? I am more suited just being a shareholder who drives a corolla.

I can’t predict what the accessories market will be like here, let alone overseas but I do know some people always want extra stuff, extra add ons and can never resist the urge to show off. Plus many of the accessories are very practical too.

So practical, here’s a release about ARB and Ford partnering up on 3 May 2021:
Ford and ARB Announce Collaboration to Supply Off-Road Accessories for Ranger and Everest

Even after ICE utes fade away and electric utes take their place, accessories will still be required. I just don’t have the courage to top up.
 
ARB has rocketed up since the start of Covid. As a long time member of the 4X4 community (both for pleasure and as an occasional freelance writer of remote travel articles for a national magazine) I can understand this. Lockdown has been a time for many to review their 4X4 gear. Many more have decided if they can't travel overseas then they will do it locally - hence the 12 month wait for a caravan (despite them being built locally). In fact, getting on as we are, my wife bought a van which we've just taken delivery of but had to buy a replacement tow vehicle as the Prado 4X4 we owned wasn't up to the job. If you are well off you can buy a Landcruiser for just shy of $100K but many opt for a new or good used ute for half the price. Mine has what I regard as the minimum options added for remote travel and they set me back over $12,000 - and if planning extreme 4X4 travel without a van then you could easily double that for the extra addons that requires. Now I didn't buy ARB (apart from the canopy) because I know I can get equivalent equipment from places like Ironman more cheaply. However, many older Australians with little touring knowledge but plenty of cash are just going for known names or relying on their dealer - and ARB is the best known name around.
ARB's chart history is pretty much doing little until Covid. Can it continue its rate of share price income? In my book, no, because it has risen too much, too quickly and will need to take a breather soon. The chart shows a rising price channel and price almost always breaks down out of those channels eventually. A trade now would be high risk but price has bounced off the lower price channel boundary to rise back to the top boundary 4 times since March 2020. Now close to that lower boundary, will it do it again? Price looks to be trying to break above ressitance at $48 and should it do that (and history repeats) it will make a potential target of $62.
Price is just above the lower channel boundary and while that boundary isn't a magical line in the sand I wouldn't be suprised to see price test and possibly retest that boundary before moving higher (if it doesn't capitulate and fall out of bed).
High risk but good potential profit if it plays out.
As for ARB's products and profits, my personal feeling is that with borders likely to be opened in the next month or two I'd say product is flying out their doors as cabin fever reaches its zenith. However, once the gates are open I suspect the vast majority of new recreational vehicle users will be on the roads and the level of ARB sales will fall away. One of the reasons why ARB's price has been historically fairly flat is that the products they sell are often good for the vehicles lifetime - ie they never need to be replaced or updated (apart from suspension components). So perhaps not a long term hold?
ARB 6Oct21.png
 
A postscript to my prior post. I never traded ARB despite my knowledge of the industry. I always felt their rapid growth wasn't in keeping with their historical performance and unsustainable. There have been several buy opportunities but you can't keep in touch with every share on the ASX and perhaps I just never looked at it at the right time. I am sorely tempted (despite the ASX potentially correcting). Perhaps if price breaks above $49.60 to make a higher weekly peak..........
 
@Greynomad99 Thank you for your post. It was interesting to hear from your prospective as someone who is very experienced in 4x4. My situation is very different to someone who is considering buying today. Maybe TINA also helped ARB over the past 15 months as well. I know there are many other competitors out there as well but I am much more aware of ARB than other brands. Posts like yours will help protect green eye naive people (like me) from falling in love with a stock. I will continue to think ARB is a great company but I need to hear your point of view. Otherwise I will fall in love and not have an exit plan.
 
Faramir said:
@Greynomad99 Thank you for your post. It was interesting to hear from your prospective as someone who is very experienced in 4x4. My situation is very different to someone who is considering buying today. Maybe TINA also helped ARB over the past 15 months as well. I know there are many other competitors out there as well but I am much more aware of ARB than other brands. Posts like yours will help protect green eye naive people (like me) from falling in love with a stock. I will continue to think ARB is a great company but I need to hear your point of view. Otherwise I will fall in love and not have an exit plan.
Click to expand...
Not having an exit plan is where most people who dabble in the ASX come unstuck. Many don't have a plan and as markets unwind (as they are now) they , ride the beast into the abyss, hoping price will turn - which it almost always does but often after significant losses. But we're probably all guilty of hanging on too long sometimes. Buying is easy. Selling is really hard.
As for ARB I mentioned previously that it may still have a little further to fall (back to the lower boundary of a price channel), and yesterday it did so to be close enough to that boundary to be considered as there. US market close a bit higher last night and today might see a better outcome for ARB and the market in general if our market recovers after reacting badly yesterday to NZ's interest hike.
Good luck and keep thinking about stop losses.
 
from a high at start of year nudging $55, ARB had a fall yesterday to be close to $46 after a brokerage house brought out a report of likely margin compression.

Credit Suisse reckons ARB will continue to increase its revenue by 4.8 per cent to $621.5 million this financial year, and by 7 per cent to $645.7 million in the 2023 financial year. Its revenue outlook is driven by ARBs strong offshore growth prospects, particularly in the United States.

However, thinner operating margins will lower the bottom line despite that revenue growth. Credit Suisse has revised down its forecasts for ARB net profit after tax (NPAT) by 3.8 per cent for this financial year to $140.4 million and by 13 per cent for 2023 to $135.4 million.

Analyst Andrew Hodge attributed the last year jump in margins to three factors: ARB's belt tightening around staff and IT spend during COVID19, retail stores contribution and JobKeeper (which he thinks was least important).

He said that in March 2020, before discretionary retailers knew a locked-in population would turn to shopping and before the federal government announced any subsidies, ARB management decided to keep any additional costs out of the business until the revenue future became clear.
"So while ARB is already very well managed, we would go further and say that the cost base relative to the revenue for FY21 was so tightly controlled that it is not sustainable," Mr Hodge said. "It is these costs predominately around people and IT that we believe are necessary to the longterm success of the company but will reduce the EBIT margin in FY22, FY23 and outer years."
Click to expand...

Credit Suisse also thinks the margin compression risk will flow into consensus downgrades over the next two years.
 
SDI yesterday as well, we are going to see a raft of these downgrades, margins are getting smashed by the supply chain issues and geographic costs. Interestingly its not a demand side issue that people were scared of, but a supply side one. Its going to be a rough reporting period for many businesses.
 

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