Fund Manager Summary
The fund managers believe that NTAW Holdings Ltd presents a significant investment opportunity, particularly following the recent developments with Cooper Tyres. In their opinion, the company’s contract to distribute Cooper Tyres in Australia for the next six and a half years provides a solid foundation for future profitability. Despite the market's reaction, which saw the share price decline from $1.14 to $0.78, they noted that Cooper tyre sales contribute 25% of NTD profits, indicating potential stability. After discussions with management, they expressed confidence that NTD would continue trading with Cooper at least until 2027, and possibly beyond. This reassurance led them to substantially increase their exposure to the business, resulting in a positive trading update and a current share price of $0.97.
Source: Trading View
Commentary From The Managers
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Collins St Asset Management
30 June 2023
$0.57
Summary
- 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.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
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.
Summary
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.
Summary
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.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
"It seems the market overreacted to the Cooper Tyres sale, creating a compelling entry point. With NTAW Holdings Ltd's solid distribution track record and potential for extended contracts, investors may find themselves pleasantly surprised by the upside ahead."
Last Updated: 30 Jun 2023
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Frequently Asked Questions
Who is investing in NTAW Holdings Ltd (ASX:NTD)?
Fund managers including Collins St Asset Management have invested in NTAW Holdings Ltd (ASX:NTD).
Why do fund managers invest in NTAW Holdings Ltd?
Fund managers are investing in NTAW Holdings Ltd due to its strong distribution agreement with Cooper Tyres, which is expected to remain in place until at least 2027. Despite initial market reactions to the sale of Cooper Tyres to Goodyear, fund managers were reassured by management about the company's future prospects and potential for extended agreements. This confidence, coupled with positive trading updates, has led to increased investments, reflecting a belief in the company's resilience and growth potential.
What happened to NTAW Holdings Ltd (ASX:NTD)?
There have been no recent updates from fund managers regarding NTAW Holdings Ltd although fund managers including Collins St Asset Management have previously commented.