Home / Opinion / Road to recovery

Road to recovery

Opinion

If any part of the economy is experiencing a sharp, ‘V-shaped’ recovery, it is car use. A number of ASX-listed companies stand to benefit from widespread avoidance of public transport.

Macquarie Securities has ‘outperform’ ratings on toll road operators Transurban Group and Atlas Arteria, online automotive classifieds business carsales.com and auto parts and accessories supplier Bapcor.

Macquarie says: “As Australians emerge from hibernation they are getting in their cars and driving, and avoiding public transport. Expect to see more road trips too, not just due to restrictions, but because people may also want to avoid planes.

  • “A change in car use behaviour could be a tailwind for car sales. There is no recovery in official data yet but Google searches for new and used cars have been rising rapidly in recent weeks and this could signal material pent-up demand for new and used car dealers.”

    Macquarie’s analysis points to China, where higher road use has continued several months after restrictions were eased. It says a similar trend is emerging here, with spending on tolls and

    Macquarie’s target price for Transurban is $15.17 a share – 6.2 per cent above the current price of around $14.30. The stock hit a peak of $16.37 in mid-February before falling to a low of $10.04 on March 19.

    The target price for Atlas Arteria is $7.26 a share – 11 per cent above the current price of around $6.54. The stock hit a peak of $8.50 in mid-February before falling to a low of $4.33 on March 23.

    The target price for carsales.com is $15.30 a share, which is actually above the current price of around $16.04. The stock hit a peak of $19.09 in mid-February before falling to a low of $10.47 on March 23.

    The target price for Bapcor is $5.40 a share, which is above the current price of around $5.84. The stock hit a peak of $7.11 in mid-February before falling to a low of $3.15 on March 25.

    Bapcor and carsales.com are fully priced, based on the current levels, but may provide buying opportunities on any future dips.

    Macquarie says: “Toll road operators are so far the only ASX companies to quantify the improvement in sales trends since shutdowns eased.”

    It says the trend observed in China has been repeated in several countries and Australia appears to be no different.

    Transurban’s weekly traffic declines were at their worst in the first half of April, down between 51 and 65 per cent across Australia. The rate of decline has slowed considerably since then and the company has reported that “high traffic has rebounded faster than public transport, suggesting that social distancing is encouraging more people to commute using their cars.

    Part of the investment case for carsales.com is that people who previously relied on public transport may need to buy a car. The company waived all advertising charges for April and offered a 50 per cent discount in May.

    The company has reported that site inventory rose from around 210,000 vehicles to $230,000 in May, while buyer traffic has been consistent.

    The case for Bapcor includes the likelihood that a shift to more use of private vehicles will see sales growth for after-market auto services. The easing of the drought may also be a help in this respect.




    Print Article

    Related
    Labor’s $3m cap proposal could repeat franking credits debacle

    In the 2019 federal election, Labor’s proposal to abolish cash refunds for excess franking credits went down like a lead balloon. So, will the $3 million cap proposal see Labor revisit history?

    Kevin Pelham | 15th May 2024 | More
    Australia could pay a high economic price for an ageing China

    China needs its 1.4 billion citizens to start spending. But its ageing population is reluctant to loosen the purse strings, especially while the social security net remains inadequate.

    Nicholas Way | 8th May 2024 | More
    Surf’s up: Making waves in retirement

    Forget the bucket list. Far better to find a pursuit, whether it be a sport or hobby, which you can derive pleasure day in, day out.

    David Murphy | 23rd Apr 2024 | More
    Popular