Management of AP Eagers Ltd (ASX: APE) and Automotive Holdings Group Ltd (ASX: AHG) must be rubbing their hands together over their prospects for the next month-and-a-half.
The two motor groups are likely big beneficiaries of the budget tax breaks for small business, particularly the ability to write off purchases up to $20,000 right away. And the news couldn't have come at a better time. The lead up to the end of the financial year for many companies in June is usually a very busy period, but this year is going to be much busier than normal.
Many small businesses including sole traders and tradespeople, use motor vehicles on a daily basis to conduct their work and provide their products and services. Sales of new vehicles are likely to soar – and we should know in early June how new car sales are tracking.
That's exactly what Treasurer Joe Hockey and the Federal government want though – they want small businesses spending and generating higher economic activity.
AP Eagers says it represents 27 car brands and 11 different truck and bus brands and operates mostly along the east coast of Australia, Adelaide and Darwin. The company generated $2.9 billion in sales last financial year and made a profit of $76.2 million, up 20% over the previous year.
Automotive Holdings is headquartered in Western Australia, but has automotive operations across the whole country as well as a refrigerated logistics division, and is Australia's largest automotive retailer. In the company's latest half, it generated record revenues of $2.6 billion and made a net profit of $46 million – up 17% over the previous corresponding half.
Interestingly, AP Eagers owns 19.9% in the larger Automotive Holdings, perhaps a reason why AP Eagers sports a market cap of $1.6 billion compared to Automotive Holdings' $1.35 billion.
So far this week, AP Eagers' shares are up 2.2%, while Automotive Holdings has rocketed up more than 7%, compared to the S&P/ASX 200 (Indexasx: XJO) (ASX: XJO) rise of just 1.7%.
