Growth Focus: AMA Group Ltd (AMA)

by Patrick Taylor

Date of Data Capture: 26/9/2016


Classification: Automobiles & Auto Parts

Current Price: $1.11

Market Capitalisation: $525 M

Forecast EBITDA Growth: 23.51%

Gross Yield: 2.73%

Consensus Price Target: $1.34

# Covering Analysts: 3

Discount at Current Price: 20.72%

Price Target Trend: Increasing

Signal Time Frame: Monthly-Weekly-Daily

Trend Bias: Up-Flat Long-Medium

Short-term: Positive Neutral
Medium-term: Positive
Long-term: Positive

Recommendation: Buy

Set up Notes:
• AMA has been consolidating a great rally over the last 12 months after gaining 360% in the 12 months prior.
• Fundamentally strong they have been delivering solid results and retain robust forecasts going forward.
• They are also technically positive with a recent break of linear resistance in August and the $1.00 structure in September, they now have to clear $1.10 previous highs to see blue sky, this is being tested now.
• Some volatility is likely but we see support at $1.00, $0.90 and $0.80 (if it needs the room) but momentum is building and we expect to see it chase its lofty price targets higher from here.

Growth Focus: AMA Group Ltd

Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.

When selecting growth stocks we are really trying to align strong current performance with excellent forecasts with a solid technical outlook and close signal correlation. With AMA Group (AMA) we think we have a great example of this approach and it should be clear to see where the rubber meets the road, and despite the tired cliché, this stock is one we believe could be about to hit top gear... again.

First listing on the ASX in 2006 AMA rallied well and gained about 150% in under a year before they took a turn for the worse as the GFC let the air out of their tyres and saw prices veer close to zero before righting themselves and getting back on the right track. They have shown themselves to be well-versed in crash repairs and since the lows of 2009 we have seen a grinding and gritty performance and a return to strength based on both organic growth and also through acquisitions.

Working primarily through their subsidiaries with a focus on automotive aftercare services, AMA has their businesses activities spread between automotive protection products, panel repair, electrical and component remanufacturing. The most growth has been seen in panel repair where recent investments have increased market share, kept profits humming along and represents an engine of growth going forward.

While they pay a small dividend we are really along for the ride based on capital gains and we aren’t the only ones hitching on, with only three analysts covering the stock it is reassuring that all of them retain positive views only, with current pricing to targets showing a 20% discount in the buyers favour with the consensus view seeing their fair price at $1.34. Couple this with excellent forecasts and there seems to be little that might drag them back or keep them from firing on all cylinders.

The technical picture is just as exciting, with an excellent correlation for the longer-term signalling that has turned to the positive again in the last few weeks, as the stock moved through significant resistance barriers. Their last potential pit-stop remains right at current levels with $1.10 being the price peak achieved on their previous run back in 2007 before the wheels fell off the Global economy.

We should expect some volatility here but it shouldn’t be much more than a small detour on their road of recovery and we do not see any obvious bumps in their ongoing victory lap. The combined strength of the fundamental performance and forecasts - feeding into a technical picture that is speeding up – presents a potential bottleneck formation that seems it might be about to get throttled.


This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.

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