ASX listed Autosports Group is undervalued says broker Barclay Pearce. Picture Getty Image
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Broker Barclay Pearce Capital (BPC) has a Buy rating on Autosports Group (ASX:ASG), with a target price of $3.44 (versus current price of $2.16).
Autosports Group is a retail automotive industry that focuses on the sale of new and used motor vehicles.
It also conducts selling of finance and insurance products on behalf of retail financials and automotive insurers, sale of aftermarket products and spare parts, as well motor vehicle repair services.
In the last half, ASG reported a revenue increase of 16.6% to $1.06 billion, and a 71% increase in NPAT to $35m.
BPC believes ASG’s acquisitions will drive continued revenue growth into FY24, supported by a growing order pipeline from the resilient luxury market.
Demand in the luxury auto market is expected to exceed new vehicle supply through the second half of FY23 and to FY24.
The opening of ASG’s Ringwood BMW and Motorrad greenfield sites will supplement ASG’s organic growth through to FY24, says BPC.
The broker says service and parts revenue should maintain organic (like-for-like) growth rates of 6%-9%, and despite inflationary pressures, revenue growth should maintain the group’s operating leverage.
“We don’t expect any significant earnings revisions for FY23 and future periods,” said the note from BPC.
“We are initiating research coverage on ASG with a 12-month price target of $3.44, and with a BUY recommendation”.
Taylor Collison has also issued a Buy recommendation on Trajan Group (ASX:TRJ) with no target price.
Trajan is a manufacturer and supplier of analytical and life sciences products and devices used in the analysis of biological, food, and environmental samples.
The broker says Trajan’s double-digit organic revenue growth of 18.6% is well above industry CAGR average of around 5-6%.
The company’s capital equipment order book continues to grow after demand increased following supply chain issues in the first half.
“We now see this positively as it underpins 2H revenue,” said the note out of Taylor Collison.
“We also expect inventory levels to decrease with supply chains easing, providing some working capital release.”
Trajan’s all four recent acquisitions have also performed at or above management’s expectations.
Axel Semrau stood out as the key contributor (longest held of the four acquisitions) as it benefited from the increased move to automation workflows through its Chronos platform, especially in the food-testing industry.
“We expect this trend to continue with heightened food standards in Europe as an example, but will also look for material uplift in the CRS and Leap Pal Parts businesses by year end,” said Taylor Collison.
Trajan has reduced its net debt by 28%, increasing confidence around the ability of the company to generate material cash flows from operational activities.
“We are again forecasting FY23 revenue at the top end of guidance and EBITDA of $19.6m, which doesn’t account for the normalisations included in guidance,” said Taylor Collison.
Now read: Trajan delivers another strong half as it upgrades guidance
The views, information, or opinions expressed in the interview in this article are solely those of the brokers and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
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