The Autosports Group (ASX: ASG) share price has climbed 2.67% higher in Friday morning trade. At the time of writing the share price is changing hands at $3.275 a piece.
The ASX All Ords company's share price has jumped 13.1% over the past 24 hours after it released its FY25 results. For the year, the share price 51.62% higher.
For context, the ASX All Ordinaries Index (ASX: XAO) is down 0.31% today, but 12.08% higher than this time last year.
Yesterday morning, Autosports Group posted a 8.2% year-on-year hike in revenue to $2.865 billion. It also revealed a net profit after tax (NPAT) of $32.9 million, which is 46.4% lower than FY24.
In a note to investors, Macquarie Group Ltd (ASX: MQG) has revealed its latest stance on Autosports Group and its shares.
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Strong upside ahead for the ASX All Ords stock
The broker said it maintains its outperform rating on Autosports Group shares and raised its 12-month target price to $3.63, up from $2.82 previously.
At the time of writing, that represents a potential 19.7% upside for investors.
Outperform. ASG's margins have bottomed and are beginning to recover. It is the most leveraged ASX exposure to the potential removal of the LCT [luxury car tax]. Inorganic growth remains in focus, and ASG's balance sheet is well capitalised to take advantage of the pipeline. Prior ASG research.
We raise TP by 29% to A$3.63, from A$2.82. We move to a NTM PE-based valuation (NTM EV/EBIT excluding floor plan multiple prior), with our valuation set at the midpoint of a 13-15x range.
The bottom end of our range is based on ASG's historic discount to APE of -40%. APE is currently trading on 21x, which at ASG's long term discount implies a multiple of 13x. ASG trades at a discount to APE, given APE's 1) brand diversity; 2) market share; and 3) liquidity. We believe a discount to APE is justified, but it should start to narrow over time, given 1) ASG is well capitalised to accelerate its organic growth via strategic M&A; 2) it has high market share in luxury brands, which is set to benefit from the removal of the LCT; and 3) liquidity is improving.
The top end of our range is based on PWR's CY25 multiple of ~15x. We do not believe ASG should trade at a discount to PWR given ASG's 1) better liquidity; 2) higher quality brand exposure (luxury vs mass market); and 3) its robust M&A pipeline.
What else did Macquarie have to say?
The broker noted that Autosports Group management is actively assessing acquisition opportunities. The company targets $250 million per year in revenue growth from acquisitions, with multiples typically 4-6x UNPBT plus assets.
We think ASG could exceed this target in FY26 given 1) two acquisitions were already announced (Porsche and Mercedes Canberra); 2) quality assets are trading at cyclical profitability lows; 3) mgmt confidence in the pipeline (we are not aware of any other potential deals); and 4) funding capacity. ASG has available debt capacity of $110m, which mgmt believes is sufficient to execute on its pipeline in the next 12 months. Further expansion in Mercedes and Geely Motors brands appears likely, in our view.
Macquarie has lowered its earnings per share guidance for FY26, FY27 and FY28 by 2.3%, 5.2% and 5.1% respectively as higher depreciation and amortisation offsets underlying EBIDTA increases of 2%.
