NZ Automotive Investments Limited Direct Listing - One of the Largest Used Vehicles Dealerships

842 Views25 Feb 2021 09:22
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SUMMARY

NZ Automotive Investments Limited (NZAI) aims to list on the New Zealand exchange via a direct listing on 25 February 2021.

NZAI is a used automotive business operating throughout New Zealand. NZAI’s business is split across two divisions: Automotive Retail and Vehicle Finance. The Automotive Retail division was founded in 2011 and it operates under the “2 Cheap Cars” brand. The vehicle finance division was founded in 2019 and operates under the “NZ Motor Finance” brand.

Over FY18-20, on average NZAI sold 11,092 cars each year at a price of NZ$6,845/vehicle to generate a revenue of NZ$76m. As per management estimates, NZAI had an 8% market share of all imported used vehicles sold in New Zealand, for 12 months ending 31 March 2020. Over FY18-20, overall revenue grew by 3.2%, gross profit by 7.86% and pro forma EBITDA by 21.09%. Although, NPAT was down 3.72% due to higher finance costs.

NZAI plans to pay out 50-60% of NPAT as dividend each year. Based on our estimates of FY21 earnings and a 60% NPAT payout ratio, implies 4% cash dividend yield. Please note that this is for illustration purposes only and has not been calculated with any inputs from NZAI.

In comparison to Turners Automotive, its closest peer, the shares will be at a substantial discount on EV/EBITDA basis, however, they will be at a slight premium in terms of p/e and will offer a lower dividend yield, based on our estimates. At the indicative listing price, the yield appears attractive in our view, with the potential growth of the financing business expected to provide some future upside.

(NZ '000)

FY18

FY19

FY20

6M20

6M21

Number of vehicles sold

10,919

11,337

11,020

5,859

3,919

Average revenue per vehicle

6,745

6,918

6,871

6,684

7,741

Revenue

73,652

78,433

76,012

39,163

30,418

Gross profit

15,645

14,886

16,875

8,349

6,829

Pro forma EBITDA

7,133

5,943

8,637

4,393

3,950

NPAT

4,392

3,386

4,229

1,884

1,867

Dividend

2,064

4,256

957

532

1,064

Total assets

15,434

18,889

29,413

27,459

30,491

Cash and cash equivalent

5,623

5,024

1,775

5,868

8,304

Total debt

4,066

8,000

7,999

7,439

7,870

Total liabilities

27,629

31,998

39,194

39,250

39,512

Pro forma total liabilities

7,629

11,998

19,194

19,250

19,512

Net cash flows from operations

2,653

467

(56)

3,392

8,577

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