I too am a long term holder - bought my first ARB shares more than two decades ago, and still hold. Yes, mgmt are excellent (always have been), the balance sheet is strong (always has been), revenues are growing (slowly now), and the business continues to develop, but for how much longer will their current rate of progress justify the current share price valuation. Eg, Macq have them on a PE of 25 (FY17), 23 (FY18), 21 FY19. It is very hard to justify multiples like that when you only grow revenues 6% YoY. There are plenty of good companies, with strong franchises and good balance sheets, on much lower multiples which are growing significantly quicker than that. I still hold ARB, but haven't topped up for years. Nothing in this update will change that.
Year after year, ARB used to reliably report strong double-digit growth - the 10% CAGR over 10 years they highlight; it used to be 15% CAGR over 10 years - and I hanker for a return to those days. I appreciate that they're now a much larger businesses, and know that elephants don't gallop, but I would like to believe they can again, do much better than 6% revenue growth. Faster revenue growth (esp. US) would make me happy because it's necessary to drive the share price higher, IMHO.
What other specifics would make me happy . There is plenty of real estate in today's presentation focused on the Australian retail network, but in the last 6-8 months they've mentioned a number of issues facing their manufacturing operations (eg, capacity, industrial action, lost manufacturing contracts, an inability to tool-up quickly enough for the volume of new vehicles releases, and now possibly some lost sales due to a lack of stock (reading between the lines)), but they've released very few details on the problems or of their plans re: manufacturing. Eg, will they need to start manufacturing closer to Europe or the US to support growth in those regions, or do they just increase Kilsyth and Thai manufacturing?
Also, international growth in Q3 slowed, compared to that in the first half. The US generated "steady growth", Europe "continues to perform steadily", more sales resources being recruited in Thailand, and they are trying to get the middle east market established. But there is no really positive news update from any of those markets. Based on their fantastic track record, I've got a lot of respect for management and give them the benefit of the doubt, but that catalogue of issues and slow progress, and the general impressions created in this update (and prior ones), does tend to paint a picture of a company which is finding it harder and harder to grow.
So, in short, I'm patient, but watching closely; I've held the stock forever, but I haven't fall in love with it. As I said in my previous email, there is no need to panic, but there is no really positive news either. GLAH.
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