CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Carsales share price: Where next following acquisition announcement?

We examine the implications of Carsales’ latest acquisition announcement.

Carsales Share Price on watch following announcement

Online marketplace company Carsales (ticker: CAR) on Wednesday announced it had entered into an agreement to acquire a 49% stake in the US-based Trader Interactive.

Under the agreement, Carsales will pay $797 million or US$624 million for the 49% stake in the business. That transaction price implies a CY20 enterprise value/ EBITDA multiple of 26.5x.

Company Profile: Trader Interactive is an online marketplace business which specialises in providing marketing solutions and services in the trucking, recreational vehicles and powersports spaces, among other areas.

From an operational perspective, in 2020, Trader Interactive generated adjusted revenues of US$123 million on earnings (EBITDA) of US$61 million. Over the long-term, Carsales Management noted that the company has delivered consistent growth, touting a CAGR of 13% over the last five years.

Why: Management noted that the rationale behind the Trader Interactive acquisition was centred on building out its international reach and gaining access to the appealing verticals in the US market.

Consequences: The immediate impact will be a slight earnings per share bump, with management noting that the acquisition will have a mid-single digit earnings impact immediately following the finalisation of the deal.

The deal will be funded through a combination of debt and equity, with the company noting it would extend its current debt facility ($222 million) as well as launch a $600 million entitlement offer.

The stock is currently in a trading halt pending the completion of the above noted entitlement offer.

Analyst View

Commenting on today’s announcement, analysts from Macquarie said the:

‘Acquisition makes strategic sense although appears fairly priced on initial inspection. We will seek more colour on the conference call around the potential EBITDA/margin upside that CAR can extract from Trader Interactive.’

Overall, when compared to other auto classifieds businesses the deal looks favourable. The investment bank pointed out that Auto Trader Group (ticker: AUTO) trades on a 36x EBITDA 2020 multiple and that online classified businesses – on a global level – trade at approximately 27x EBITDA.

While Macquarie analysts have a Neutral rating on the stock, their 12-month price target of $23.00 per share suggests the investment bank believes CAR has further to run from current price levels.

Beyond Trader Interactive

Besides the acquisition announcement, Carsales also took the chance to provide the market with a number of updated 2021 forecasts.

On that front, and on a reported basis, the company said it expected FY21:

  • Revenues of between $422-426 million, implying a growth rate of between 7-8%.
  • Earnings (EBITDA) of between $238-242 million, implying a growth rate of between 18-20%.
  • Profits (NPAT) of between $130-134 million, implying a growth rate of between 8-12%.

YTD the Carsales share price is down 3.61%.

Trade ASX-listed stocks long and short with IG today

Create an IG account or log in to your existing account to get started now.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.