BCA Marketplace PLC (LON:BCA) has provided a short trading update this morning, essentially confirming it is trading at the upper end of expectations. Our forecast assumptions are towards the top end of the consensus range, and we remain comfortable with our assumptions. We remain comfortable with our original investment thesis, and would expect the shares to perform well over the longer term given the structural growth opportunities that lie ahead on a Pan European basis, which translates into double digit EPS growth through to 2020E.
Trading update: BCA has delivered a trading update this morning essentially confirming it is trading at the upper end of market expectations. Following on from the strong H1 results delivered in November, trading patterns have remained positive in H2 driven by “strong trading, contractual wins and customer long term commitments continuing.” As promised at the time of the IPO, the company is working towards moving toward the Premium segment of the Official List, which is expected to take place before the end of the calendar year.
Key investment attractions: We believe BCA offers critical infrastructure to the automotive market across Europe, and anticipate above average growth being generated over the foreseeable future, particularly on the Continent. We also believe BCA Dealer Pro and its wider technology platform has been overlooked to date. We believe this product has strong strategic value, and will help to improve the quality of earnings and drive volumes across the core business. We see a similar development occurring within UK Buyer Finance, which should also help to improve the quality of earnings from here.
Forecasts: Our headline forecasts remain unchanged other than revenue, where we have increased our forecasts (10-12% through to 2019E) to reflect its strategy of contractual purchasing that should give better long term visibility, with also the opportunity to increase the value at auction. We believe the impact of this strategy is broadly neutral at the EBITDA per vehicle metric. Our forecasts have been at the upper end of consensus expectations for some time, and we remain comfortable with our assumptions.
Investment view: We remain comfortable with our original investment thesis based on the underlying performance of the business. We continue to believe the growth potential is significant from here across all divisions, especially in Europe in future years. We continue to see BCA Marketplace PLC as attractive critical infrastructure as it has now touched over 3.5m vehicles in the UK supply chain alone, and would expect to see continued growth under most post Brexit scenarios. With an attractive dividend yield of 4% from 2018 we would expect the shares to perform well given the unique structural growth opportunities ahead.
