Automotive Holdings Offloads Struggling Refrigerated Logistics at an Attractive Price

AHG Placement: Results Disappoint on Refrigerated Logistics, Lack of Near Term Catalyst

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Equity Capital Markets

Automotive Holdings / Equity Capital Markets

Automotive Holdings' fiscal 2016 result was broadly in line with market expectations but slightly below our forecast. Nevertheless, it was a solid result. The core automotive division, representing around 80% of group earnings, was the best performer, performing better than we expected. No guidance was given, but management is positive on the outlook for automotive, while refrigerated logistics remains a work in progress. The firm is taking steps to improve the performance of refrigerated logistics via a transformation program. While there is scope for improvement, we think the extent of this is limited, as this business has no sustainable competitive advantages, evidenced by margins being hurt by competition from new entrants. The company is raising capital to fund AUD 62 million in recent acquisitions within automotive and add capacity for growth.Analyst: Ravi Reddy

Automotive Holdings' fiscal 2016 result was broadly in line with market expectations but slightly below our forecast. Nevertheless, it was a solid result. The core automotive division, representing around 80% of group earnings, was the best performer, performing better than we expected. No guidance was given, but management is positive on the outlook for automotive, while refrigerated logistics remains a work in progress. The firm is taking steps to improve the performance of refrigerated logistics via a transformation program. While there is scope for improvement, we think the extent of this is limited, as this business has no sustainable competitive advantages, evidenced by margins being hurt by competition from new entrants. The company is raising capital to fund AUD 62 million in recent acquisitions within automotive and add capacity for growth.Analyst: Ravi Reddy

Accelerated Growth in Auto Drives Automotive Holdings' Result