BAP is a Australian automotive parts and services company that has been feeling Bunnings’ move into the automotive accessories sector, which is eroding BAP’s pricing power and customer footfall. BAP received a $5.40 ($1.83 billion) offer from Bain Capital in mid-2024, which was subsequently rejected by the board, saying it undervalued the company, another bunch of directors getting a takeover horribly wrong, with the stock having subsequently halved. Operational challenges and competitive pressures, have weighed on the stock, driving its share price well below the initial offer.
The company delivered a horrible result in October, here, which led to further reshuffling on the board level. Incumbents might be more open to approaches considering the pain endured by shareholders. We think there is embedded value in the franchise that operates Autobarn, Burson, Autopro and Midas, with the stock trading ~30% below its average 5-year earnings multiple (EV/EBITDA) i.e. it screens very cheap, but there are reasons for it.
- We can see BAP catching the eye of suitors, but we think some stability in operations is probably required first.
MM is cautiously bullish towards BAP
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