RPM Automotive Group (RPM.ASX)

[Rawz]

RPM is a microcap ($19m market cap) that predominantly operate in the tyre space. Retail and commercial.
They also sell other automotive related product including motorsport equipment and other performance accessories.

Last year was a great result with improved margins, free cashflow and;
$121m revenue
$12.5m EBITDA
$4.6m NPAT

RPM is trading on a P/E of 4.3.

Priors years were garbage.. so if you like to look into the past to judge the future i can say dont waste you time lol. Basically in the years prior they were rolling up a lot of ma and pa tyre stores, issuing a ton of shares to buy these stores which led to the usual sell side pressure as previous business owners wanted to get their life savings out. This is often seen with these roll up strategies. The acquisitions also put a lot of debt on the balance sheet, almost too much but thanks to last years performance it is definitely manageable. This period was not a time one would want to be invested as the SP peaked at 47 cents and is now at 7.9 cents. However it was necessary to get the country wide footprint/scale. By all accounts the expansion via acquisition part is over so an investment today is far different from an investment in the years prior.

FY25 guidance should be coming out early next month. Thanks to a number of new initiatives it is expected that NPAT will grow substantially and possibly up towards the $6m mark. This will put RPM on a forward P/E of 3.3...........

The new initiatives include a large tyre recycling program. New partnership with Yokohama tyres and WHG saas product (like eroad).

So basically the investment case is earnings per share is finally starting to grow at a decent rate and it trades on a very undemanding multiple. we can get the double engine growth dream, multiple expansion and EPS growth.

The risks are; execution risk on the tyre recycling plants which require a lot of capital to get off the ground. Recession risk which was touched on in the last call, they said some customers were doing the bare minimum on tyre changes to save money. Debt risk- the debt levels are fine imo but i dont think we will see a dividend anytime soon. And lastly dilution risk. There are 96m options outstanding with an exercise price of 10cents per share by Aug next year. There is a high chance these all lapse and personally i hope they do. If not then i will see a 40% cap gain from my initial buy price of 7.1 cents. so other way ill be happy if they lapse or if they get to above 10 cents and are exercised.

This post is already longer than i intended it to be so ill just finish by saying it is founder led and management own 24%

[Rees Dart]

This is  eerily similar to a company I'm in the red in, NXD near a low.mkt cap in the $60 mill something.Im thinking the cycle is about to come good for these companies

[Rees Dart]

Apologies Rawz, wrong ticker,its NTD NTAW

National Tyre & Wheel Limited, is a tire and wheel importer and distributor in Australia and New Zealand, with a related wholesale business in South Africa. The Company owns 11 businesses in the tire and wheel market, which includes Tyres4u, Exclusive Tyre Distributors, Integrated OE, Solid Plus, Statewide Tyres, Dynamic Wheel Co., Tyrelife Solutions, Tyreright, Black Rubber and Carter's Tyre Service. Tyres4U specializes in the importation and distribution of application specific tires and tubes. Exclusive Tyre National and NZ Distributors and Tyrelife Solutions delivers passenger, light truck, and four-wheel drive (4WD) tire solutions. Integrated OE provides original equipment tire and wheel solutions to manufacturers, with a focus on caravans and truck trailers. Solid Plus delivers wheel and tire management solutions. Statewide Tyres supplies budget tire solutions. Dynamic Wheel Co. offers a range of alloy and steel wheels.
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