Have you ever dreamed of riding a Harley Davison Motorcycle along an ocean road feeling the wind in your hair? I know I have and it turns out I am not alone with the number of registered motorcycles in Australia more than doubling to over 800,000 in the last 10 years.
Now if you're anything like me when I read such statistics I start to wonder how I can take advantage of this trend. Catching a trend early has certainly paid off handsomely for investors in companies such as Bellamy's Australia Ltd (ASX: BAL) and Blackmores Limited (ASX: BKL), who have ridden the growing Chinese consumer demand for enormous returns.
While I am not promising such spectacular results a recently listed company may just be worth investigating.
Just over two months ago MotorCycle Holdings Ltd (ASX: MTO) listed on the ASX.
Its prospectus lists its aims as taking advantage of the growing demand for motorcycles along with consolidation of a currently fragmented industry. A quick search reveals there are over 700 single-operator dealerships in an almost $3 billion sector.
MotorCycle Holdings itself was founded in 1989 and is currently Australia's largest motorcycle dealership with 34 franchises operating in New South Wales, Queensland and the Australian Capital Territory. Not only does it offer new and used motorcycles but it also offers accessories, parts, service, repair, finance, insurance and warranty products.
Crunching the numbers Motorcycle Holdings generated revenue of $185 million in 2014-15 with a net profit of $4.6 million. Looking forward the prospectus forecasts revenue to rise to $212.8 million in 2015-16, with a 50% rise in NPAT to $6.9 million in the same period.
Moving onto management, Motorcycle Holdings appears in good shape with the company's Chairman, Bob Thorn, previously the managing director of Super Retail Group (ASX: SUL) for 9 years. A group which encompasses the automotive parts retailer Supercheap Auto.
The one blemish I was able to find in Motorcycle Holdings' future appears to be scooter sales which have fallen by over 20% in 2015 and continued to fall in the first half of 2016. While this appears strange with the push towards fuel efficiency, scooter sales make up only 6% of industry sales so any impact should in theory be minimal, but worth watching.
Foolish takeaway
The fear of missing out is a strong human emotion. To cope with this emotion I set myself a series of investing rules. My number one rule is to never invest in companies newly floated on the ASX. My reasoning behind this rule is simple. It is rare that a prospectus contains a warts and all assessment of the company's future.
After all it is basically a marketing device to encourage new investors. Of course with any rule it is important to keep an open mind. As such I read with great interest that in the first 6 months of 2016 motorcycle sales (both on and off road) rose by over 4%.
