Bapcor/BAP

Bapcor’s result seemed a touch better than we’d expected, given the trading update indicated sales for the first 6 weeks of the second half were reasonably healthy.

In the exact same manner as our previous note, we’d draw attention to forecast eps growth, which simply looks too high given the macroeconomic weakness they are citing in the retail arm.

Unless there’s a sudden turnaround in the retail sales data, or noticeably lower interest rates (both highlighted below) there’s little to get excited about, in our view. Also, the cash conversion rate, which has been patchy of late, can indicate a company that is “stretching” to hit guidance (a signal of low earnings quality).

So we sit on the sidelines, for now.

From the Q&A call: management did indicate that trends hadn’t broadly changed, in their view, from the 1H, so perhaps that trading update is not extrapolate-able; equally, maybe it means things are getting better and they’ve not yet updated their priors. Difficult to know.

Mgmt also indicated that their market shares have been steady, noting that the press thought (3 months ago) that BAP were losing share, and now (today) seem to be saying they are gaining share, mgmt thought it unchanged, overall.

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