Brokers discuss the longer term strategy for
-Adjustments to the Eagers Automotive portfolio
-Supply chain impacts upon vehicle availability
-The importance of scale
-Potential growth drivers
Some recent portfolio repositioning by car retail group
The company intends to purchase the WFM Motors Canberra dealerships and properties for
Last month, the Bill Buckle dealerships were sold for
The broker now points to the longer term strategic impact of the
Recycling capital from the Bill Buckle transaction allows for greater market consolidation opportunities and the expansion of easyauto123 (used cars) into the ACT, points out
After the proposed
It appears the bigger picture at present for Eagers is access to new vehicles. Supply remains highly constrained and industry commentary points to this persisting through 2022, points out Morgans.
New vehicle supply
The key to near term earnings, says Credit Suisse, is the supply of new vehicles to the Australian market. It's felt the main hitch to supply was the shortage of semi-conductors, even before the
Now the broker sees even greater risk to the supply chain from
In the absence of greater clarity around such risks, Credit Suisse retains its Neutral rating and 12-month price target of
Looking at the supply shortage from another angle,
Morgans agrees with Credit Suisse that vehicle supply is a major swing factor for FY22. Nonetheless, the broker also believes supply dynamics will support higher gross profit margins for even longer than
The importance of scale
Industry dynamics will support scale operators longer term, suggests Morgans.
While margins may normalise in the medium-term, the impact may be offset by further consolidation, explains the analyst.
In the case of Eagers, balance sheet strength, ongoing efficiencies and delivery of the used car strategy should also help stave off margin compression.
Outlook
The ongoing rationalisation of the company's property portfolio, the earnings uplift as easyauto123 matures and further acquisition opportunities present growth drivers for
FNArena's database has six broker ratings with five Buy ratings and one Hold rating and a consensus target price of
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