Bapcor (ASX: BAP) has reported impressive growth for May and June, higher than expected.
What is Bapcor?
Bapcor was originally called Burson Group. Today. Bapcor is a specialist auto parts business but what most consumers don’t know is that Bapcor is more than a retailer of spare parts. Its bread and butter is ‘trade services’. For example, when you get your car serviced by a mechanic, the mechanic doesn’t store all of the parts for the make and model of your car in their shop. Instead, they rely on a nearby distributor like Burson’s who can deliver the exact parts within a matter of hours.
Bapcor’s update
Bapcor revealed that COVID-19 impacts have not been as severe as expected. Indeed, Bapcor’s businesses have grown much stronger than expected, particularly Autobarn and Burson. Other businesses are recovering faster than expected.
In May and June Autobarn has experienced same store sales growth of 45% over the prior year. That’s a huge growth rate. That followed on from April same store sales falling around 3%. On a full year basis it’s estimated same store sales growth will be 8%.
Burson Trade saw same store sales growth of 10% in May and June compared to last year after a 10% drop in April. Full year growth is expected to be approximately 5%.
The other segments of New Zealand, specialist wholesale and Thailand are recovering.
However, management think the strong demand in retail and Burson is partially driven by stimulus.
Profit expectations
Bapcor is now expecting FY20 net profit before significant items will be between $84 million to $88 million. That’s after AASB 16, but before costs relating to acquisitions and transition costs.
In FY19 it generated pro forma net profit after tax (NPAT) of $94.3 million.
A solid update by Bapcor. I’d be happy to buy some shares today for the defensive earnings and Asian growth potential. The Bapcor share price is currently down 1.7%.
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
