AMA Group (ASX: AMA) is a pure re-opening play

Nick Sundich Nick Sundich, July 29, 2022

Today, Friday July 29, is the deadline for ASX companies to lodge their quarterly cash flow and activity statements. As you’d imagine, the market announcements platform is full of them, making it difficult to see which ones were the best. We think AMA Group (ASX: AMA) was one of the standouts. 

 

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Who is AMA Group? 

AMA Group is a company that provides repair services and missing parts for road vehicles. Indeed, the AMA stands for Automotive Aftercare. This company was listed on the ASX in 2006 and after nearly going bust during the GFC was restructured and saw a roaring decade in the 2010s.  

The onset of COVID-19 hit the business because lockdowns meant fewer cars on the road. The company, and the broader industry, has also been hit by persistent component shortages. It also had to undertake a major restructuring of its balance sheet. On top of all this, the company was hit with multiple lawsuits – one from former chief executive Andy Hopkins and another by operators of Smashcare, a smash repair franchise that AMA acquired last year. 

 

AMA Group (ASX:AMA) share price chart (Graph: TradingView)

 

A good quarter and a good year 

Despite the external dramas AMA has still delivered strong financials and its most recent quarterly was no exception. It reported $9.7m in cash from operating activities during the quarter and managed to exceed its closing cash balance guidance by $2.2m. It also increased its full year normalised EBITDA guidance by approximately 30% to $20-$22m.  

This morning’s results failed to impress shareholders, as shares are flat today. AMA Group did warn that it had been hit by labour shortages and it expected this to continue into FY23. Furthermore, it’s Repair Volumes remained below pre-COVID levels after exceeding them for a few months in CY21.  

 

A pure re-opening play 

Investors might be optimistic that it can achieve good results despite these issues. It’s EV/EBITDA ratio for FY23, on the basis of consensus estimates, is just 9.1x. However, it assumes $70.3m in EBITDA, which would be more than 4x higher than FY22 consensus estimates of $15.3m. 

AMA will be releasing its results on 23 August 2022 and we think this is one investors should watch closely, especially if it provides positive guidance for FY23! 

 

 

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