AHG, AP in record territory
Shares in rival car dealers Automotive Holdings Group and AP Eagers are tracking each other deeper into record territory, drawing strength from a friendlier Federal Budget and robust trading buoyed by acquisitions.
Having breached its June 2007 peak nearly two weeks ago, AHG added 6¢ yesterday to finish at a new closing high of $4.61, while AP Eagers gained 7¢ to a record finish of $9.75.
Each has easily outperformed the S&P-ASX 200’s gain of 5.6 per cent for the year. AHG, revalued to $1.4 billion, has added 21 per cent, AP Eagers 63 per cent.
The latter, AHG’s biggest shareholder, told its annual meeting last week it had seen a 17 per cent increase in trading for 2015, helped by “strong” sales of cars, if not trucks. And it anticipated additional momentum from the Federal Budget’s small business tax breaks, which are seen to be lifting consumer confidence.
WA has been the weakest market for new vehicles, with sales down 6.7 per cent in the first four months of 2015 against national growth of 3.5 per cent.
However, AHG’s strong east coast network has lessened exposure to the slowdown in its home State, and its expanding higher-margin refrigerated transport business has generated a valuable profit stream outside of new and used vehicles.
Its shares could have longer to run. On yesterday’s close AHG is trading at a forward price earnings multiple of 15.2, well below AP Eagers’ 21.5.
Deutsche Bank puts the average PE for consumer services companies at 19.4, against a median of 17.5 since 2006.
