ASX:NTD
NTAW Holdings Ltd
Investment Summary
The fund managers believe that NTAW Holdings Ltd has significant potential despite recent market volatility and challenges such as rising costs and logistical constraints. In their opinion, the company, as the largest distributor of tyres and wheels in Australia and New Zealand, is positioned well within a non-discretionary industry. Although the share price has faced downward pressure, falling from $1.14 to around $0.57, the fund managers noted that NTD's strong management team and robust capital allocation strategies instill confidence. They anticipate earnings of 7.5 cents per share next year, suggesting a low Price to Earnings Ratio of 7.7x, which they view as undervalued. Furthermore, they are optimistic about the potential for a dividend or capital management to highlight the intrinsic value of the company. Given these factors, the fund managers have increased their exposure to NTAW, underscoring their belief in its future growth and resilience.
Commentary From The Managers
Collins St Asset Management
30 June 2023
$0.57
- Collins St Asset Management believes National Tyre and Wheel (NTD) presents a classic value investment, originally purchased at around 40c with 50c in inventory.
- During the downturn caused by Covid, Collins St Asset Management seized the opportunity to increase their stake at lower prices.
- NTD has a strong operational history of over 30 years as a private entity, now transitioning to the ASX.
- Collins St Asset Management praises NTD's management for its strategic growth through both organic and acquisitive methods.
- Despite management's solid performance, NTD's share price has not reflected this improvement.
- In 2022, NTD faced challenges such as logistical issues, a weaker Australian dollar, and rising shipping and oil costs.
- The outlook for NTD is optimistic, with potential growth as prior hurdles begin to reverse.
- Consensus predicts earnings of 7.5c per share for NTD next year, resulting in a Price to Earnings Ratio of just 7.7x.
- Collins St Asset Management concludes that given the quality of NTD's business and promising future, its current valuation appears undervalued.
Collins St Asset Management
30 Sept 2022
$0.72
- Collins St Asset Management highlights that National Tyre & Wheel (NTD) is the largest distributor of tyres and wheels in Australia and New Zealand.
- The company operates in a non-discretionary industry, providing stability amidst economic fluctuations.
- Recent challenges include rising costs and a weakening Australian dollar, but these costs are typically passed on to consumers.
- NTD is recognized as a high-quality company with a management team adept in capital allocation.
- Management has aligned interests with shareholders by investing significantly in NTD shares.
- The current Price to Earnings Ratio is just 5-6 times, with an anticipated drop to 4x in 2024, signaling undervaluation.
- The share price decline is viewed as an overreaction in volatile markets.
- If share prices do not recover, there may be a dividend or capital management initiative to highlight the company’s intrinsic value.
Collins St Asset Management
31 Mar 2021
$0.82
- Collins St Asset Management notes a recent announcement regarding the sale of Cooper tyres to Goodyear.
- NTD is contracted to distribute Cooper Tyres in Australia for the next six and a half years.
- There is potential for the distribution agreement to be extended beyond 2027 due to NTD's track record.
- Market reaction led to a significant share price drop from $1.14 to 78c, reflecting concerns over 25% of profits being tied to Cooper tyre sales.
- Collins St Asset Management engaged with management to clarify that NTD will at least continue trading with Cooper until 2027.
- Post-discussion, Collins St Asset Management increased their exposure to the business, becoming a substantial shareholder.
- The business has since provided a positive trading update, with shares trading at 97c.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.