The MotorCycle Holdings Ltd (ASX: MTO) share price has jumped 22% this morning after the company revealed profit guidance.
Motorcycle Holdings describes itself as Australia’s leading motorcycle dealership and accessories group with 48 franchises operated from 31 dealership and 8 retail accessory locations in Queensland, New South Wales, Victoria and the Australian Capital Territory.
Motorcycle profit guidance
The company said it has experienced strong sales levels throughout the last five months after the initial COVID-19 restrictions were eased.
It’s expecting the first half of FY21 to show underlying EBITDA (click here to learn what EBITDA means) of more than $20 million.
The company said that the underlying EBITDA includes interest and amortisation on leased properties as an expense to enable comparison to prior periods when lease expenses were included.
Management said that the company’s liquidity remains sound, with the cash position continuing to improve as a result of strong sales and as stock levels are reduced, especially in used motorcycles and accessories.
As well as cost cutting measures undertaken during the pandemic, the company’s results have been supported by various government stimulus measures, including the jobkeeper program. The company has not qualified for the jobkeeper program past the initial period which ended in September.
The company warned that this year’s results shouldn’t be used as a guide for future performance.
Summary
This was a strong update from Motorcycle Holdings, I’m not surprised it has surged so much. However, the question will be how long this can continue. Is the only reason for the strength the stimulus and the lack of other spending options for consumers?
I personally wouldn’t want to buy shares after the strong rise, FY22 may not be as good. Other ASX growth shares appeal to me more like Pushpay Holdings Ltd (ASX: PPH).
