If anyone ever wonders why ARB trades at elevated valuation multiples, reading through this presentation will go a long way to explaining why.
(Although, if someone could explain the relevance of Slide 18 - the one with the picture of the gardeners pruning a shrub(?) - that would be appreciated.)
What is - I think - very instructive is the numerous references in the presentation to the investments being made, and the strategies underway, to drive continued growth for years to come, both domestically as well as globally.
Also, they today make reference to growth now resuming in the mining states, which looks like the impact of the resources recession is over.
In that light, think is instructive to study how ARB performed during the during the resources downturn.
The graphic below represents ARB's NPAT over the past decade-and-a-half, a period which included the commodity boom, as well as the resources sector recessions before and after the boom. It shows that, while ARB's financial performance benefits meaningfully from buoyant macroeconomic conditions, it is largely immune to even the severest of cyclical downdraughts.
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I suspect the lesson here is for those who want to "time the cycle" when it comes to investing in ARB: it is a bit of a futile exercise, based on the financial history of the company.
Getting back to the presentation, it occurs to me - based on the references to the capability being put in place to facilitate future growth - that we could at some stage over the foreseeable future and before long, enter another period of accelerating growth as the recovery in domestic demand coincides with increasing sales traction in international markets.
Trouble is, with the current share price valuing the company at some 15x EV/EBITDA, it appears that the market is already factoring in that favourable growth outcome, to some degree.
Still, I think the foundations are in place for ARB to break the $100m EBIT mark at some stage in the next 3 years, possibly, and certainly within the next 4 years. (For context, FY2017 EBIT was $67.5m.)
(20min delay)