Why the MotorCycle Holdings (ASX:MTO) share price is on watch

The MotorCycle Holdings (ASX: MTO) share price will be one to watch this morning after the company provided a business update to the ASX.

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The MotorCycle Holdings Ltd (ASX: MTO) share price will be one to watch on Tuesday morning. This follows the motorcycle dealership group’s announcement after market close yesterday regarding a business update. The company’s shares closed Monday’s session at $2.79, down 1.06% for the day.

What was announced?

MotorCycle shares will be in focus today after the company reported positive sales momentum leading to an improved result.

According to its release, MotorCycle Holdings expects to report a bumper result for the upcoming financial year’s end.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) is forecast to come in at between $42 million and $45 million. This includes interest and amortisation on leased properties as an expense, which coincides with when the lease was added.

The company also revealed it received $5.8 million from the federal government’s JobKeeper program. In turn, this reduced the effects of the temporary store closures mandated by the Victorian and Queensland Governments.

Due to the stronger-than-expected profit result, upbeat trading conditions, and robust balance sheet, the board has decided to reward shareholders. The company will pay out around 50% to 70% of its net profit after tax (NPAT) to shareholders in dividends.

MotorCycle Holdings said new motorcycle unit sales increased by 51% for the first three months of the calendar year. This is in comparison to the prior corresponding period. Pleasingly, demand for both new and used motorcycles is continuing its run for the remainder of 2021.

Lastly, the company noted that with low levels of debt, and low-interest rates, it will actively pursue acquisition opportunities.

Motorcycle Holdings share price review

It has been a great 12 months for the MotorCycle Holdings share price, which has risen by more than 217%. However, more recently, the company’s shares have climbed by just 5.2% year to date.

MotorCycle Holdings shares are currently sitting just shy of their 52-week high of $2.98.

Based on valuation grounds, the company commands a market capitalisation of around $172 million, with 61 million shares outstanding.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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