Ann: Becoming a substantial holder, page-9

"Maybe a downgrade but I'm starting to think that it's as much about investor perception of GUD (and Bapcor for that matter). Hardly a day goes by when we don't read about Tesla or Graphite or Rare Earths and, as a result, investors see this as a business heading towards obsolescence. The fact that, in my opinion, any serious impact on their revenue from this advancement is at least 5 to 10 years away gets scant consideration. Then there's every chance that a smart business like this would adapt in some way in any case. "


@gragou02,

I suspect you're right about the thematic sentiment-o-meter reflecting a low reading for GUD.

And, to the extent, that is indeed impacting the share price I am not unhappy about it because it is allowing me to buy shares at lower prices than would ordinarily be the case.

Because, as you say, the ICE fleet in Australia will continue to increase in size for a number of years to come.

Not just that, but I think the pervasive investing herd is making the mistake of concluding that company earnings growth is limited by industry growth. That may be the case in industries where capacity ownership is already quite concentrated, but it doesn't necessarily apply to highly fragmented industries, such as vehicle spare parts.

As case in point:

10 years go, GUD’s auto business generated Revenue and EBITDA of $78m and $19.8m, respectively.

5 years ago, auto Revenue and EBITDA was $95m and $30.9m, respectively.

This year, auto Revenue and EBITDA will be something like $328m and $89m

That works out to CAGRs for Revenue of 15% pa and EBITDA 16%pa.

The addressable market probably only grew at around 2% or 3% pa over that period.