3 reasons why the Bapcor (ASX:BAP) share price could be a clever buy

Bapcor could be an interesting business to think about.
The post 3 reasons why the Bapcor (ASX:BAP) share price could be a clever buy appeared first on The Motley Fool Australia. –

The Bapcor Ltd (ASX: BAP) share price is certainly one to think about for the long-term.

Bapcor has seen a lot of volatility over the last several years, but it has continued to grow.

The 2020 calendar year was a year like no other for the auto parts business. COVID-19 had a huge impact on demand, both negatively at the start and positively as stimulus kicked in and Australia got on top of the outbreak.

But that may not be the end of the growth story for the Bapcor share price or its profit. Here are a few reasons to consider Bapcor:

Asia opportunity

The business calls itself Australasia’s leading auto parts business. The ASX share is now expanding into Asia in a major way.

It’s taking Burson, the business that supplies mechanics with parts, into Thailand (and perhaps beyond, eventually). At the last update, there were six Burson locations in the Asian country generating a total of $4 million revenue. In Australia it has around 200 trade locations.

Bapcor wants to grow the number of Bursons to more than 60 over the next five years. This is estimated to be a turnover target of around $100 million.

But the company also has a 25% stake of Tye Soon which it recently acquired. That’s a business which has operations in a number of Asia Pacific countries such as Singapore, Malaysia, Australia, South Korea, Thailand and so on.

Tye Soon currently has turnover of around $200 million and management would like to see it expand turnover to around $400 million over the next five years.

Asia is a huge market for Bapcor to expand into beyond the small(ish) population centres of Australia and New Zealand.

Asian growth could be a big driver of the Bapcor share price in the years to come.

Expanding networks

Bapcor isn’t finished with growth in Australia and New Zealand though. When you look at the 5-year targets, it’s expecting to increase the size of its networks and revenue across all of its other segments.

It wants to grow its Australian trade store network from 200 to 260, adding 10 to 12 new stores each year. Bapcor wants to increase the New Zealand trade store numbers from 73 to over 90 too.

With its specialist wholesale division, it wants to grow total turnover from $515 million to $650 million.

With its commercial vehicle businesses (light and heavy), it wants to increase its combined store network from 49 to around 90. That could translate to growing revenue from $180 million to $340 million.

Bapcor’s goal for Autobarn is to grow the store number from 133 to 200.

The company has a very large goal for its Australian service division. It currently has 105 locations and wants to increase that to 500 outlets in Australia.

Strong demand leading to operating leverage

All of the above goals and targets are focused on growing the top line revenue.

But with scale can come stronger operating leverage, for good companies.

Bapcor is working on a number of areas to increase its margin including an efficient and optimised supply chain (with advanced distribution centres), selling a higher proportion of own brand products (with higher margins), improving its online offering, and the improved use of technology.

The Bapcor share price can benefit from the rising profit margins.

In the FY21 half-year result, whilst revenue grew by 25.8%, pro forma net profit increased by 54% to $70.2 million. The dividend continues to grow, funded by the growing profit.

The post 3 reasons why the Bapcor (ASX:BAP) share price could be a clever buy appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

More reading

Analysts name Afterpay (ASX:APT) and this ASX share as buys
2 ASX 200 shares tipped to positively surprise during reporting season

Here are 2 ASX dividend shares analysts rate as buys

These ASX dividend shares keep giving investors a payrise

2 ASX 200 shares that could be buys for dividends

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!