Why the MotorCycle Holdings share price jumped 5% today

MotorCycle Holdings Ltd (ASX: MTO) saw its share price jump 4.7% to $3.81 today, after reporting a decent set of 2016 financial year results.

The company owns and operates a number of motorcycle dealerships around Australia, selling both new and used bikes, including 8 of the top 10 selling motorcycle brands. It also offers services and smash repairs as well as rider training school. It listed on the ASX in April 2016.

Here’s a quick summary of the main points from the 2016 financial year (FY16) results:

  • Revenues up 21% to $209.3 million compared to FY15
  • Units sold up 13% to 13,931
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) up 64% to $12.8 million
  • Net profit after tax up 74% to $8 million
  • Organic growth delivered an additional $9.4 million in increased sales
  • No dividend declared yet
2016 MotorCycle Holdings results

Source: Company presentation

New motorcycle sales zoomed 17.5% higher to 7,538 units – well above market growth of around 1.8% which suggest MotorCycle Holdings has a competitive advantage over its rivals. Strong same-store-sales growth was also recorded.

While the company didn’t pay a dividend this period, MotorCycle Holdings says it expects to pay a dividend early next year for the six months to end of December 2016 period.

What next for MotorCycle Holdings?

The company says it expects the market to maintain modest growth rates, but it has the opportunity to grow by acquisition as well as organically. According to data from the Federal Chamber of Automotive Industries (FCAI), total new motorcycle, ATV and scooter sales reached 108,711 in 2015. In the first half of 2016, sales rose 3.5% compared to last year.

Trading on a P/E ratio of around 18x, MotorCycle Holdings appears cheaper than car dealer AP Eagers Ltd (ASX: APE), although more expensive than Automotive Holdings Group Ltd (ASX: AHG).

If the company can continue to generate above system growth in unit sales, then the current share price may prove to be cheap.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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