Analysts have valued Peter Warren Automotive at between $449m and $1bn as the company’s private equity owners hope to capitalise on the booming car sales market by embarking on an initial public offering.
Morgan Stanley estimates the business is worth between $449m and $601m including debt and the price equates to between 13.9 and 18.6 times its forecasted annual net profit.
Analysts at Jarden, meanwhile, believe the business, including lease liabilities, is worth between $826m to $1,007m, including debt, equating to between 10.9 and 13.3 times its forecasted earnings before interest, tax, depreciation and amortisation.
Jefferies analysts say that they believe that the business is worth between $609m and $696m.
They say listed rivals AP Eagers trades at 17.3 times its profit and 14.7 times forecasted EBITDA and Autosports 11.1 times profit and 10.7 times forecasted EBITDA.
Morgan Stanley analysts believe the company to generate $1.6bn of revenue in 2021 from 22,237 new vehicle sales and 8,3490 used vehicle sales and $32.2m of net profit, up 21 per cent from the previous corresponding period.
Jarden, meanwhile, anticipates it will make $76m of earnings before interest, tax, depreciation and amortisation for the 2021 financial year and $77m for the calendar year.
This comes as new vehicle sales increase 9.5 per cent and used car sales 12.6 per cent as consumers spent money on new cars amid the global pandemic that has prevented international travel.
Last year, there were 917,000 new cars sold in Australia compared to the 20-year average of 1 million, but sales troughed in November when the staged a strong recovery.
Peter Warren operates 70 vehicle dealer franchises across Queensland and NSW and is owned by Quadrant Private Equity alongside the Warren family.
The company owns two of its properties, including its flagship 22 acre site at Warwick Farm in Sydney and has EBITDA margins of about 5 per cent.
Quadrant bought in 2016 and under its control, it combined with James Frizelle’s Automotive Group, which was established in 1985 and is one of the largest motor vehicle dealers in Queensland.
With $21.7m on its balance sheet and no corporate debt, excluding its floorplan financing, the automotive dealer hopes to grow earnings through growing car sales and acquisitions in a highly fragmented market.
Analysts say that finance and insurance contributed 11.5 per cent of its gross profit for the 2020 financial year.
Of its overall sales, 65 per cent come from new car sales and 16 per cent used car sales and it also offers finance and insurance products and parts and accessories.
Jarden analysts say they see the stronger housing market will play a greater part in fuelling Peter Warren’s earnings, with car sales historically having a strong correlation.
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