Fund Manager Summary
The fund managers believe that the outlook for MaxiParts (MXI) is promising, particularly following the acquisition of 80% of Förch Australia for $9.7 million. In their opinion, while the estimated EBITDA of $2.5 million from this acquisition may not be transformative, it presents an opportunity for significant EBITDA growth as MXI expands into other states like New South Wales and Victoria. The presence of only one meaningful competitor, Wurth, suggests a favorable market landscape. Furthermore, the fund managers note that MXI is well-positioned for significant earnings growth in FY24 due to a resilient market, anticipated synergies from the Truckzone acquisition, and a full-year contribution from Förch. They emphasize the potential for higher gross margin products and easy wins to enhance profitability across MXI’s 27 sites.
Source: Trading View
Commentary From The Managers
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Naos Asset Management
30 May 2025
$2.39
Summary
- MaxiParts is a commercial vehicle aftermarket parts distributor in the Australian market, focusing on commercial vehicles from light vans to heavy trucks.
- It operates in a growing industry valued at over $2 billion, benefiting from strong structural tailwinds.
- The investment thesis is anchored in the rising demand for truck maintenance as the average truck age exceeds 16 years.
- With more freight being moved annually, quick and cost-effective parts availability is critical to minimize lost revenue from trucks being off the road.
- Aftermarket parts, like those sold by MaxiParts, are cheaper and quicker to obtain than OEM parts, especially after warranty periods lapse.
- MaxiParts was restructured in 2021, divesting its capital-intensive trailer division to focus solely on parts distribution.
- Since the restructuring, it has made acquisitions and is building scale within the industry.
- Industry consolidation is underway, with larger players like MaxiParts gaining share from smaller competitors as fleet operators seek nationwide service.
- MaxiParts competes in an oligopoly alongside Babcorp and Supply Network, benefiting from rational competitors with complementary niches.
- The trend of moving away from OEMs toward aftermarket providers is accelerating, which MaxiParts aims to capitalize on through its growth strategy.
- Investors are currently paying ~10x PE with mid-single-digit free cash flow yields, indicating valuation upside as MaxiParts improves execution and profitability.
- Execution risk remains a key consideration, as MaxiParts must prove its ability to integrate acquisitions and enhance margins.
- The company targets gross margin improvements through a better product mix, aiming to lift EBITDA margins from 10% towards Supply Network’s ~20%.
- A key metric to monitor in upcoming results is incremental revenue flow-through, with management asserting margin expansion will enhance profitability.
- One macro concern is the adoption of electric vehicles, but electric trucks currently represent <2% of new sales and face significant constraints.
- Even with electric vehicle adoption, the complexity of managing both ICE and EV trucks will benefit specialized distributors like MaxiParts.
- MaxiParts has a strong presence in WA, where demand has held up better compared to the weaker East Coast, providing geographic balance.
- The focus going forward will be on gross margin expansion, rational competitive dynamics, market share gains from smaller players, and consistent delivery of earnings improvements.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
Naos Asset Management
30 May 2025
$2.39
- MaxiParts is a commercial vehicle aftermarket parts distributor in the Australian market, focusing on commercial vehicles from light vans to heavy trucks.
- It operates in a growing industry valued at over $2 billion, benefiting from strong structural tailwinds.
- The investment thesis is anchored in the rising demand for truck maintenance as the average truck age exceeds 16 years.
- With more freight being moved annually, quick and cost-effective parts availability is critical to minimize lost revenue from trucks being off the road.
- Aftermarket parts, like those sold by MaxiParts, are cheaper and quicker to obtain than OEM parts, especially after warranty periods lapse.
- MaxiParts was restructured in 2021, divesting its capital-intensive trailer division to focus solely on parts distribution.
- Since the restructuring, it has made acquisitions and is building scale within the industry.
- Industry consolidation is underway, with larger players like MaxiParts gaining share from smaller competitors as fleet operators seek nationwide service.
- MaxiParts competes in an oligopoly alongside Babcorp and Supply Network, benefiting from rational competitors with complementary niches.
- The trend of moving away from OEMs toward aftermarket providers is accelerating, which MaxiParts aims to capitalize on through its growth strategy.
- Investors are currently paying ~10x PE with mid-single-digit free cash flow yields, indicating valuation upside as MaxiParts improves execution and profitability.
- Execution risk remains a key consideration, as MaxiParts must prove its ability to integrate acquisitions and enhance margins.
- The company targets gross margin improvements through a better product mix, aiming to lift EBITDA margins from 10% towards Supply Network’s ~20%.
- A key metric to monitor in upcoming results is incremental revenue flow-through, with management asserting margin expansion will enhance profitability.
- One macro concern is the adoption of electric vehicles, but electric trucks currently represent <2% of new sales and face significant constraints.
- Even with electric vehicle adoption, the complexity of managing both ICE and EV trucks will benefit specialized distributors like MaxiParts.
- MaxiParts has a strong presence in WA, where demand has held up better compared to the weaker East Coast, providing geographic balance.
- The focus going forward will be on gross margin expansion, rational competitive dynamics, market share gains from smaller players, and consistent delivery of earnings improvements.
Summary
Naos Asset Management
30 June 2024
$1.97
- Naos Asset Management notes an update to FY24 expectations for MXI, indicating a softer than anticipated revenue and NPBT performance.
- Core MXI truck parts revenue is projected to grow by approximately 6%, down from 12% in 1H FY24, with ATSG customer revenues declining to $0.
- A noticeable slowdown in customer activity has been observed, particularly among clients on the Eastern seaboard, who are more susceptible to economic downturns.
- Inconsistent competitor pricing has emerged as companies strive to retain clients, often at low margins.
- The margin profile at MXI remains a significant concern, with NPBT margins reducing amidst ongoing cost pressures that have not been offset by price increases.
- Despite the scale (approaching $300 million revenue in FY25), MXI has yet to achieve EBITDA margins above 10%, contrasting with peer Supply Network Limited's 17% margins.
- Management’s expansion and lease extensions have increased depreciation and interest, offsetting operational gains.
- Future EBITDA margin improvements of 2-4% are anticipated, targeting levels of 11-13% over three years.
- New Japanese Parts program aims to enhance customer acceptance with superior quality at lower costs, potentially improving gross margins.
- Forch Division products have higher margins but represent a small revenue share; growth is expected at 25% p.a.
- Focus on front of truck parts presents higher margin opportunities, contrasting with lower-margin trailer parts currently significant in sales.
- Minimal exposure to European truck parts, known for higher profit margins, represents a missed market opportunity.
- Overall FY24 financial results have not met expectations; however, MXI has growth potential for EPS and free cash flow generation.
- For FY25, MXI management needs to demonstrate EPS growth beyond just acquisitions to avoid being a low P/E business.
Summary
Naos Asset Management
31 Mar 2024
$2.36
- Naos Asset Management emphasizes the importance of management's detailed commentary and performance insights.
- The recent acquisitions, particularly in the past 18 months, have raised concerns among MXI shareholders.
- Recent profit downgrade primarily due to AASB-16 lease accounting impacts.
- Significant growth in the Japanese Parts Program, achieving 50% growth on the previous corresponding period (PCP) and 15% growth in 1H FY23.
- The acquisition of Independent Parts is expected to enhance growth potential in the Japanese Parts Program.
- Forch revenue has seen growth of 17% year-over-year since its acquisition, indicating a promising long-term opportunity.
- Delivery of +12.5% organic revenue growth showcases resilience despite business transitions.
- Focus on integrating organic growth projects and achieving >8% p.a. organic revenue growth is essential for re-rating MXI.
- Management aims to expand EBITDA margins from ~9.6% to 15% over the next 3-5 years without needing further external capital.
- The second half of FY24 is positioned to be critical for MXI’s performance as a standalone entity.
- Key targets for 2H FY24 include reaching organic revenue guidance and exceeding EBITDA margins of >10%.
- Successful integration of Independent Parts and resolution of legal matters with ATSG are also significant priorities.
- Achieving these targets may lead to a re-rating of MXI's valuation in the wider market.
Summary
Naos Asset Management
31 Dec 2023
$2.70
- Trading Update & Acquisitions: Naos Asset Management notes that MXI's acquisition of Independent Parts (IP) supports its ambition to be a key player in the aftermarket truck parts market.
- Financial Performance: The IP acquisition, costing ~$30 million, generated ~$45 million in revenue and $3.4 million in EBITDA in FY23.
- Western Australia Presence: MXI strengthens its position in WA, a region with high demand for its products and services.
- Embedded Business Model: This model, where IP has ~50% of revenue, provides a competitive edge by allowing direct customer engagement.
- Core Revenue Growth: MXI saw ~15% core revenue growth and a 33% increase in EBITDA to $5.7 million.
- Margin Expansion Potential: MXI's ongoing revenue growth and margin improvement aligns with its investment thesis, especially compared to peers.
- Concerns Over Acquisition Price: Naos Asset Management highlights skepticism regarding the price paid for IP due to its previous ownership and potential earnings maximization.
- Equity Raising Disappointment: MXI opted for a $17.2 million placement at a discount, which diverged from its strong free cash flow attributes.
- Future Expectations: Naos believes that with continued management execution, MXI's capital management strategy will align more closely with its cash flow strength.
- High Conviction Investment: MXI remains a top investment for Naos Asset Management, with potential for profit margin expansion and valuation re-rating.
Summary
Naos Asset Management
30 June 2023
$2.65
- Q4 FY23 Event: Acquisition of 80% of Förch Australia for $9.7 million on a cash free/debt free basis.
- Potential for Growth: Estimated EBITDA of $2.5 million from Förch, with significant growth potential as the business expands beyond Western Australia.
- Competition: Single meaningful competitor is Wurth, a German-based firm, indicating strong revenue potential for MXI.
- Market Position: MXI benefits from a resilient market, supported by positive outlook statements from Supply Network Ltd.
- Synergies Realization: Majority of synergies from the Truckzone acquisition expected to be realized in FY24, enhancing profitability.
- Forch Contribution: Anticipation of full-year contribution from Förch with easy wins to enhance profitability through product rollout across MXI’s 27 sites.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
"With the acquisition of Förch Australia, there's a tantalizing chance for MaxiParts to unlock substantial EBITDA growth beyond Western Australia. If they play their cards right, they could redefine their market position and tap into higher-margin products, potentially outpacing competition like Wurth."
Last Updated: 30 May 2025
Query The Data
Frequently Asked Questions
Who is investing in MaxiParts (ASX:MXI)?
Fund managers including Naos Asset Management have invested in MaxiParts (ASX:MXI).
Why do fund managers invest in MaxiParts?
Fund managers invest in MaxiParts due to its strategic acquisition of 80% of Förch Australia, which opens avenues for significant EBITDA growth beyond its current stronghold in Western Australia. The resilient market conditions, highlighted by positive forecasts from Supply Network Ltd, and anticipated synergies from the Truckzone acquisition further bolster earnings potential. Additionally, the expected full-year contribution from Förch and opportunities to expand product offerings position MaxiParts favorably for future profitability.
What happened to MaxiParts (ASX:MXI)?
There have been no recent updates from fund managers regarding MaxiParts although fund managers including Naos Asset Management have previously commented.