Business Overview
BCA Marketplace Plc provides vehicle purchase services, headquartered in the United Kingdom. The company operates through three divisions: vehicle re-marketing division, vehicle buying division and automotive division. The vehicle re-marketing division facilitates the exchange of used vehicles between vendors and buyers through both physical and online auctions. The vehicle buying division purchases used vehicles directly from the public in the UK and the Netherlands, which it then disposes of through the vehicle re-marketing division. The automotive division provides a variety of services for new vehicles from the post of entry. The company operates over 200 physical locations in the UK, Brazil, Denmark, France, Germany, the Netherlands, Italy, Portugal, Spain, Sweden, Poland and Switzerland.

Financial Highlights (H1 FY2019, £million)

(Source: Interim Report, Company Website)

The company’s revenue surged from £1,171.6 million in H1 FY18 to £1,429.7 millionin H1 FY19, due to the higher average vehicle prices and higher volumes in the remarketing division and contracts were given to the third party for remarketing. Adjusted EBITDA rose by 12.7 per cent to £85.4 millionas compared with the H1 FY18 of £75.8 million, driven by the strong growth in the United Kingdom remarketing, vehicle buying division, and international remarketing but the automotive services division’s EBITDA was down by £2.5 million. Operating profit climbed by 23.7 per cent to £50.6 millionagainst the £40.9 million in H1 FY18, reflecting an increase in the adjusted EBITDA. The group’s net debt decreased from £287.4 million to £264 million. Adjusted diluted earnings per share stood at 6.4 pence (H1 FY18: 5.4 pence). The company announced an interim dividend per share of 3 pence, an increase of 15.4 per cent as compared to 2.6 pence reported in H1 FY18.

Share Price Performance

Daily Chart as at May-20-19, after the market closed (Source: Thomson Reuters)

On 20^th May 2019, BCA shares closed at GBX 186.4, down by 1.376 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 243.10/GBX 184. The company’s stock beta was 0.24, reflecting lower directional movement as compared to the benchmark index.

Valuation Methodology

*All forecasted figures and Peer information have been taken from the Thomson Reuters.

Key Risks
Economic and geopolitical environment, strategic initiatives, competition, IT systems and information security, intellectual property relating to the online auction system, financial & liquidity risks, regulation & legislation and physical damage.

Conclusion
The company’s strong leadership position within the UK and Europe, along with its well-defined strategy, should support current rates of revenue growth. The company had shown good financial performance in the current half-yearly result and most of the revenue was generated from its vehicle remarketing division and vehicle buying division. The current market sentiment in relation to the company is fair with favourable fundamental indicators, positive estimates and valuation.As the company is planning to expand into Europe, a bad Brexit deal could increase costs for the company for doing business abroad and dampen the proceedings. Based on the strong growth prospects of the company and the valuation done using the above method, we have given a “BUY” recommendation at the closing price of GBX 186.4 (as on May-20-19) with single-digit upside potential based on 10.75x NTM EV/EBITDA (approx.) on FY20E EBITDA (approx.).

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