This should be in print in the excellent 'The Australian' on Monday 28 March 2022:

Eagers changing gear with acquisitions likely

One investment target could be Eager’s own fixed-price used-vehicle business easyauto123, says Bell Potter. Above, the Townsville dealership with manager Brett MacDonald.

• Cameron England

  Business editor

  

Eagers Automotive could recycle the $92m it will raise from the sale of Sydney northern beaches dealership Bill Buckle Auto Group into acquisitions that are a better fit.

The nation’s leading automotive group’s sale of BBAG, announced last week, was “of slight surprise’’ to Bell Potter analysts, but was explained by Eagers saying the almost 60-year old business did not fit its strategy.

“The sale proceeds will provide Eagers Automotive with additional capacity to invest in organic growth and pursue identified strategic acquisition opportunities consistent with our Next100 strategy,’’ the company told the ASX.

Bell Potter said in a note to clients it expected Eagers to pursue one or more acquisitions.

“If we look at what BBAG lacked in terms of this strategy and surmise that this is what an acquisition may bring, then it is likely to include some combination of more conveniently located sites, greater used car sales/inventory and/or more potential for expansion or productivity improvements,’’ the broker said.

BBAG’s northern beaches location “probably did not fit well with customers given Eagers is trying to move its dealerships to more convenient locations’’, it said.

Bell Potter maintained a “buy” rating on the stock while dropping its price target 3 per cent to $16.75, but said a transaction could move the needle in the short term.

“A potential catalyst for the stock is if indeed the company does make an acquisition in the coming weeks or months which makes strategic sense and results in a net upgrade to our earnings forecasts,’’ the broker said.

An alternative use of the funds would be to invest in Eager’s fixed-price used-vehicle business easyauto123, where the company is looking to scale up large-format, factory-style reconditioning centres.

“The first of these is due to open in Brisbane in a couple of months’ time, but in our view it makes sense for more of these to be rolled out in most or all state capitals,’’ Bell Potter says.

Eagers shares last traded at $13.70, up 5c.