2014 hasn’t been a good year for auto manufacturers in Australia. More makers are planning to stop manufacturing domestically, yet the automotive industry in general could see growth over the next several years.
Auto sales, repairs and maintenance are still big business. They make up more than 85% of the automotive industry apart from manufacturing. More cars will be imported due to factory closures and they will all need to be sold and serviced.
Here are three auto stocks that could be set to rise with the growing market.
ARB Corporation Limited (ASX: ARP) is a specialty retailer in off-road vehicle parts and accessories. It has factories in Thailand that can ship back to Australia and onto other markets like the U.S. where four-wheel driving has a passionate following.
The stock was added to the S&P ASX 200 Index (ASX: ^XJO) in March, which will open it up to more institutional investing. It has a 20 PE, at the top of its historic PE range. The dividend yield is 2.4%.
Automotive Holdings Group Ltd (ASX: AHE), the largest auto dealership company, is also expanding its logistics and warehouse business. Its recent acquisition of Scott’s Refrigerated Freightways, a nationwide cold logistics business, will create the largest temperature controlled carrier in Australia and diversify income streams more.
First-half net profit was up about 2%. Since a $3.20 low in June 2013, the share price is up about 23%. Its PE is 13.6 and the dividend yield is 5.2%.
Another auto dealership company is AP Eagers Limited (ASX: APE). Similar to Automotive Holdings Group, it hit a low in June 2013, then began to recover. Since then it has climbed about 30% to $5.10.
With the slowly growing economy and cheaper financing, investors will be looking forward to further growth in this cyclical industry. The stock offers a 4.5% dividend yield and the PE is 22.
The auto makers may be down and out, but auto dealerships and accessories companies won’t be adversely affected. People will still buy cars and the number on the roads increases each year. With interest rates to stay low for some time, this will encourage more car sales and drive the dealerships’ earnings.