NZ Automotive Investments Limited

Company Overview: NZ Automotive Investments Ltd (NZX: NZA) is an integrated automotive company. The Company operates throughout New Zealand through two divisions: Automotive Retail and Vehicle Finance.

NZA Details

NZ Automotive Investments Limited (NZX: NZA) is an integrated used automotive group operating throughout New Zealand via two subsidiaries: Automotive Retail and Vehicle Finance. The market capitalisation of the company stood at ~$41.9 million on 17^th January 2022.

Result Performance (H1FY22 Ended 30 September 2022)

• The company’s revenue and income increased 1.9% to $31.2 million for the full six-month period. The business was performing well prior to the Covid-19 lockdown beginning in mid-August, with revenue up 27% on the same period last year.
• Net profit after tax for the period stood at $1.4 million, within guidance range of $1.4 - $1.6 million, but a decrease of $0.5 million largely due to the effects of Covid-19 related restrictions.
• EBITDA, including finance income, for the interim period stood at $3.2 million, a decrease of $0.8 million.
• The interim gross dividend for the period was declared at 2.2 cps.
• The company’s EPS for the period stood at 3.1 cps against 4.15 cps for the same period last year.
• 39% of all 2 Cheap Cars' sales nationwide were through online sales channels during Covid-19 level 3 and 4 lockdowns. The automotive business is responding well since Covid-19 related restrictions have been relaxed.

Exhibit 1: Financial Statistics

Source: Company Reports, Analysis by Kalkine Group

Top 10 Shareholders: The top 10 shareholders have been highlighted in the table, which together forms around 86.84% of the total shareholding. Sena (David Yusuke) and Williams (Eugene) are holding maximum stake in the company at 45.89% and 36.46%, respectively, as provided in the table below:

Exhibit 2: Top 10 Shareholders

Source: Refinitiv, Analysis by Kalkine Group

A Quick Look at Key Metrics: The company’s gross margin and EBITDA margin for H1FY22, stood at 22.4% and 8.9%, better than the industry median of 21.6% and 8.6%, respectively implying decent fundamentals for the company. Current ratio for H1FY22 stood at 1.62x, better than the industry median of 1.45x, implying that the company possesses better capabilities to meet its short-term obligations than its peer group.

Exhibit 3: Key Metrics

Source: Refinitiv, Analysis by Kalkine Group

Outlook:

The company is focused towards executing the long-term strategy in order to leverage the retail business to build the diversified automotive services group. The company has stated that forecasted demand for finance is robust and the company is expecting this to continue to grow in the coming year.

Demand has remained strong for used vehicles outside of Auckland during the Covid-19 related restrictions and Auckland has shown signs of recovery in recent weeks. NZAI possesses the robust platform to continue to execute its strategy.

Demand remains strong for used vehicles across 2 Cheap Cars dealerships in November 2021 and the business expects to have an improved second half of the year under the new Government ‘traffic light system’ (Covid-19 Protection Framework) – which means that retail remains open for business.

Risks:

The company is exposed to certain risks such as Credit risk, Market risk, Liquidity risk and Currency risk. Also, the restrictions because of the COVID-19 pandemic could also impact the broader business.

Technical Overview:

Chart:

Source: REFINITIV

Note: Orange Color Line Reflects RSI (14-Period)

Stock Performance:

The company was performing well in the first four and a half months in the lead up to the raising of Covid-19 alert levels across the country in mid-August. It is enhancing key processes in the business and is confident to achieve efficiencies and improvement in the future, as the used automotive industry bounces back from Covid-19 impacts.

Considering the aforesaid facts, and current trading levels, we give “Speculative Buy” recommendation on the stock at the current market price of NZ$0.920 per share, down by 2.13% on 17th January 2022.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

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