Company Review Automotive Holdings Group (AHE)

I do not hold stock in Automotive Holdings Group now. Indeed it is one that had escaped my attention. The reporting season for 1H 2015 has started, and it was a headline that AHE had recorded a record profit that drew my attention, and has led me to formally look at the  company’s performance.

Company profile 

http://www.theaustralian.com.au/news/latest-news/automotive-holdings-profit-up-17/story-fn3dxity-1227218088432?from=public_rss&utm_source=The%20Australian&utm_medium=email&utm_campaign=editorial&net_sub_uid=6414592&nk=6cb7dbeedc4d5c9386d2d4cc5e90a2b4

It is Australia’s largest automotive retailing and logistics group. It owns 167 franchisees, and is also Australia’s largest refrigerated logistics provider. It has acquired Scott’s, JAT, and NSW car dealership Bradstreet Motor Group.

Features from 1H 2015 profit result (from Company announcement 13/02/2015) http://www.asx.com.au/asx/research/company.do#!/AHE

  • The Record Statutory Net Profit After Tax for the half-year was $45 million (up 17.4% on pcp)
  • Record Group Revenue of $2.57 billion (up 10.6% on pcp)
  • Record Operating EBITDA of $104.1 million (up17.6% on pcp)
  • Statutory EPS 14.7 cents (unchanged on capital base)
  • Increased interim dividend of 9 cents/ share.

It has successfully integrated its acquisitions, and is looking at new vehicle sales of 1.14 million vehicles for the full year. Falling oil prices and low-interest rates are driving the improved results, and should continue into the second half.

Some Fundamental Data

  • AHE has a market capitalisation of 1.16 billion, and it is in the Consumer Discretionary Sector.
  • P/E ratio is 14.09
  • Yield is 5.67%
  • Next dividend payment is 9 c/s due 12/03/2015, and is 30% franked.
  • From Commsec 06/14: Debt:Equity is 120%.
  • Also from Commsec for 06/14: Return on Equity is 12.1%

Technical Observations

Look for a break-out above $4.10 to perhaps enter.

Look for a break-out above $4.10 to perhaps enter.

This is a weekly candlestick chart including the traces of multiple moving averages of AHE over a 5 year time frame:

  • The last traded price was $3.79 within cooee of the all time high of $4.40 prior to the GFC.
  • The low point for the stock was in January 2009 at 50 cents. Buyers then have enjoyed both franked income and in excess of $3 in capital gains.
  • The second leg share price rise started in January 2012 at about $1.70, and carried the share-price to a high of $4.37 before easing.
  • Using the MMA as an indicator, the ideal long entry to the stock would have been between April and June 2012. (see green arrow)
  • This chart demonstrates quite nicely how long-term primary trends when they lose momentum not uncommonly transition into a side-ways trading range, where they may become entrenched for extended periods.
  • Eventually there is likely to be a catalyst that will cause the price movement to transition back into trending but the direction of break-out cannot be foretold with any certainty. The RSI is in the mid-range and indicates neither an over-bought nor an over-sold position.
  • It should be noted that there has been a real spike in the trading volume yesterday after the record profit result, whilst the multiple moving averages have converged suggesting that the share-price could start trending again.

Expectations and Planning

  • The positive profit result creates an expectation that the share-price will be re-rated upwards. Even if this happens, there may be insufficient upwards momentum to penetrate the trading range.
  • For this reason Chartists will look for an uni-directional impulsive move higher that not only tests but breaks through this resistance at about $4.10. This would be an entry signal to go long.
  • Fibonacci projection levels might then suggest a possible exit target at about $5 (38.2% level).
  • If this target was reached, and the momentum was still strong enough, a further target at the 50% Fibonacci level ($5.60) might be attainable.
  • One would expect that it could take perhaps 2 years to reach such levels. Whether it does or not will depend on the continuing successes of its business strategies.
  • A possible stop/loss position would be if the trading range support at about $3.40 were to be broken.
  • The next support level to be looked for would be $3.

Conclusions

Readers should not rely on this post for guidance as to whether AHE is an appropriate stock for their portfolio. Professional advice should be sought.

The history since the GFC, and the improving profit results, support a view that further gains in the share-price could well continue.

The combination of low oil prices, low-interest rates, and Australia’s ongoing reliance on road transport even with the mining sector languishing, suggest that AHE might still be a profitable longer-term investment.

 

 



Categories: Business, Chart Analyses, Trading opinion

Tags: , ,

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