Ann: J P Morgan Emerging Companies Forum Presentation, page-3

This stock has been caught in recent months in somewhat of a perfect dual storm of:

1.) fears about the internal combustion engine (ICE) going the way of the buggy whip in coming years (perceived structural threat), and

2.) sluggish consumer activity, YTD, leading to a deferral of vehicle maintenance (cyclical factor)



In terms of 1.) I think that is an overblown fear, because it will be many years (roughly a decade) before the current fleet of ICE vehicles in Australia even reaches its peak in size (and even that boldly assumes that 50% of new vehicle sales at that point in time are electric vehicles).

And in terms of 2.), well now that the federal election is out of the way, and the political uncertainty is removed, the consumer - as he/she always does after periods of electoral activity - will once again pull out the wallet and start to spend some money. Including on getting the car in for the overdue service.


The under-performance of the stock price in recent months has left it trading on a 12-month prospective P/E multiple of around 14 times and an EV/EBITDA multiple of around 10x.

So, not at all demanding valuation metrics for a ~25% ROE business growing its earnings at ~10%pa to 12%pa, and which is an industry leader busy consolidating a fragmented industry by purchasing businesses from motivated and willing private vendors who are not overly discerning on valuation parameters.

Accordingly, I have been adding to my existing holdings in recent days.

8 out of 10 level of conviction for me.

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