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BCA Marketplace PLC

BCA Marketplace PLC Attractive entry point

BCA Marketplace PLC (LON:BCA), We note the recent under performance of the shares of late and believe the current price to be an attractive entry point for investors. BCA has a portfolio of critical infrastructure products and services which positions it well in this market, and has scarcity value in our view. We see BCA as a unique investment opportunity with an undemanding valuation in the context of close peers, with a reliable yield on offer.

Used car values robust: We note the most recent monthly data from BCA Pulse, showing record used vehicle values in September, up £184 (1.9%) across the board to an average of £9,881. This data is supported by the most recent Auto trader report on used car values which showed an average figure of £12,853 in September, a year on year increase of 5%. Auto Traders data showed that used car prices have risen at twice the pace of new cars since 2011 (average values in 2011 of £8,977). Robust used values are indicative of positive trading in the used car market, implying a good environment for BCA to deliver revenue growth. We think we will continue to see healthy volumes as average stock age is >3 years with rising prices should ensure robust revenue trends.

Share price under performance: The shares have underperformed since the last earnings announcement (shares down 18% in absolute terms), which we believe presents an attractive entry point. While there is uncertainty in some of BCA’s end markets with short term supply disruptions and both OEMs and dealers struggling to maintain profitability, we believe that BCA represents critical infrastructure in the supply chain and is well positioned to benefit from current market dynamics.

H1 forecast: We expect revenue in H1 of £1,275.9m up 8.9% yoy with adjusted EBITDA of £82.7m. We have assumed interest costs for the first half of the year of £7.0m resulting in an adj. PBT figure for H1 of £62.8m, implying EPS growth of 13.1%, which we believe is impressive given the current economic environment. We view this as a conservative set of forecasts given the robust values in the used market.

Investment view: We remain comfortable with our original investment thesis based on the underlying performance of the business. We continue to believe the growth potential is significant from here across all divisions, especially in Europe in future years. We continue to see BCA as attractive critical infrastructure as it now touches over 10.6m vehicles in the UK supply chain alone and would expect to see continued growth under most post Brexit scenarios. Overall, we believe BCA Marketplace continues to offer an attractive mix of organic and income growth as it continues to leverage its unique market position on a Pan European basis executed by a proven management team.