The positives from the trading update + the transcripts from the AGM:
1. second half will be an improvement on the first half 2. second hand car business has just completed significant capital expenditure and has now reached break even EBITDA. The comments about the used car business being one of the last retail businesses to be "big boxed" suggests good long term upside 3. the costs associated with the aborted sale of the logistics business to HNA are one time events 4. staff turnover following the F+I regulatory changes appears to have stabilised 5. signs of the new car market in WA stabilising 6. no suggestion whatsoever that a further capital raising is needed 7.refigerated logistics business improving - 6% EBITDA margin is acknowledged to be low but they are "confident" of achieving "high single digits" 8. $30 million reduction in working capital 9. general tone is positive (phrases like "earnings momentum")
The negatives:
10. slowing housing market 11. it would have been good to see more clarity on debt levels 12. it is implied in the presentation that the refrigerated logistics business will be kept long term - I am not sure if this is a good thing or not 13. changing nature of the car industry (electric etc) is likely to require additional capital investment + provides opportunities for new competitors to enter the market 14. it is unclear whether the car market has in fact bottomed or not
In terms of numbers, $56-59 million NPAT equates to a PE of 10.2 - 10.8 or EPS of 15.8 cents to 16.7 cents.
The dividend policy is to pay our 65-75% of "operating profit" (which is not the same as NPAT but I will use that as a proxy rather than indulge in further guesswork) which suggests DPS in the range of 10.2 cents to 12.5 cents. Based on present share price of $1.71 the expected yield range is 5.9% to 7.3% for the current year.
AHG Price at posting:
$1.71 Sentiment: Buy Disclosure: Held
