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RPM Automotive Group gears up for big 2021 after ground-breaking December quarter

RPM’s latest quarterly report features ticks across the board and paints a pretty picture for the 2021 financial year.

RPM Automotive Group Ltd - RPM Automotive Group gears up for big 2021 after ground-breaking December quarter
Shares have been as much as 36% higher to 26.5 cents intra-day.

RPM Automotive Group Ltd (ASX:RPM) has forecast a full-year revenue increase of 44 per cent for 2021 following a hugely successful December quarter.

The group, which comprises a range of automotive sector business involved in importing, tyre sales, mechanical repairs, merchandise and roadside assistance, reported $10.9 million in revenue for the December quarter, up 16 per cent on the September quarter.

That has led the company to forecast increases of 44 per cent and 38 per cent for 2021 full-year revenue and EBITDA, to $49.2 million and $4.7 million, respectively.

Exceeded expectations

RPM managing director Clive Finklestein said the company’s performance had exceeded expectations “by almost every measure”.

“We are particularly encouraged by the increased earnings and margin improvement,” he said.

“As a company, we are pushing forward with our expansion program and are pleased to report that the newly acquired divisions have integrated well and are performing within expectations.

“With RPM currently trading at a low multiple of less than five times forecast FY21 earnings, while other industry peers in a similar space are trading at much higher multiples, we believe there is a tremendous opportunity for significant shareholder value to be unlocked here as the market becomes more aware of RPM’s accomplishments.”

Recognising the strong performance, investors have responded positively with shares as much as 36% higher to 26.5 cents intra-day.

How RPM got there

RPM attributed the growth in revenue and earnings to quality business acquisitions during 2020 as well as a curious upside to the COVID-19 pandemic – increased vehicle usage as a result of closed state and international borders.

RPM said the closed borders and restricted movement meant more people went on domestic driving holidays, including 4WDing and off-roading, as these activities grew in popularity as an alternative to interstate and international travel.

And while the popularity of these activities will continue for the foreseeable future, RPM’s smart business acquisitions and financial acumen will hold the company in good stead should a return to travel take people’s attention away from domestic driving holidays.

Capital raise

Just this week, RPM raised $5.1 million in capital to advance its operations, including the addition of Traralgon Tyre Services to its Repairs and Roadside Division.

“The placement has delivered the necessary financial backing to pursue several potential growth acquisitions which would provide an immediate contribution to earnings,” Finklestein said.

Any such acquisitions have not been included in the 2021 financial year forecasts, leaving open the potential for even greater gains should the deals come through in the March and June quarters.

- Daniel Paproth

Quick facts: RPM Automotive Group Ltd

Price: 0.33 AUD

ASX:RPM
Market: ASX
Market Cap: $38.01 m
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