Bapcor Ltd (ASX:BAP) share price rises on acquisition news

The Bapcor Ltd (ASX:BAP) share price is up on acquisition news.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Bapcor Ltd (ASX: BAP) share price is up 2% after the auto parts business announced an acquisition to the market this morning.

It is acquiring five companies that specialise in the sale of Japanese commercial truck spare parts. Those five are: Don Kyatt Spare Parts, He Knows Truck Parts, H.I.M Spares and Japanese Commercial Spares which operate businesses in 10 locations in Queensland, New South Wales, Victoria and South Australia. They operate as a co-ordinated business.

The acquisition will be funded through existing debt facilities and the issuance of new shares, it's expected to complete in early December 2018. Bapcor said that $15 million of the purchase cost is deferred until a year later and is subject to certain conditions.

Bapcor said that further details will be provided following completion.

Why did Bapcor acquire this group?

Bapcor said the acquisition is consistent with its stated direction. This commercial truck group fits into the specialist business section, providing further opportunities for consolidation and organic expansion.

The earnings from the acquisition will more than offset the full year earnings from the divested TRS business in FY19.

Bapcor CEO Darryl Abotomey said "We are excited to welcome these commercial truck teams to Bapcor. The acquisition of this commercial truck group further strengthens Bapcor's position as a specialist provider of automotive aftermarket parts, accessories and services.

"The growing prevalence of smaller commercial trucks in the Australian market will provide the group with further expansion opportunities."

It seems we'll learn more about the acquisition in a week or two, where we will get a better feel of the deal.

Is Bapcor a buy?

Before taking into account this acquisition's extra earnings, Bapcor is trading at, at worst, 18x FY19's estimated earnings using management's estimate of profit growth of 9% to 14% for FY19.

I believe this is a very attractive price for a business that continues to grow strongly organically, with the occasional bolt-on acquisition. Its current grossed-up dividend yield of 3.6% is handy too.

A bonus with Bapcor is that it's starting to expand into Asia, which could be a big opportunity. Either way, it's doing well regardless of what happens with Asian expansion.

However, investors must be wary of technological change in the auto industry with the long-term trend pointing towards electric (and automated) vehicles.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 9 January 2025

Motley Fool contributor Tristan Harrison owns shares of Bapcor. The Motley Fool Australia owns shares of and has recommended Bapcor. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

Broker Notes

These ASX 200 shares could rise 20% to 65%

Analysts are tipping these shares to deliver big returns in 2025.

Read more »

A man and his dog snooze on the couch
Best Shares

Here's why I'm still holding out for a Wesfarmers share price dip

For me, the Wesfarmers share price just isn't right at the moment...

Read more »

A woman stacks smooth round stones into a pile by a lake.
Share Market News

Here's how the ASX 200 market sectors stacked up last week

ASX energy shares led the market with a 3.19% increase while the benchmark ASX 200 rose by just 0.2%.

Read more »

A young man in a city street with a hopeful look on his face.
Best Shares

Top ASX shares to buy before the February earnings season

Our writers have high hopes for these stocks.

Read more »

Elderly couple look sideways at each other in mild disagreement
Share Market News

Here are the top 10 ASX 200 shares today

It was a disappointing end to the trading week for ASX investors this Friday...

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Mergers & Acquisitions

How Rio Tinto shares could eclipse BHP in 2025, with a little help from Glencore

The financial rumour mill is abuzz about a potential mega merger for Rio Tinto.

Read more »

A woman with strawberry blonde hair has a huge smile on her face and fist pumps the air having seen good news on her phone.
Share Gainers

Why Insignia, Lovisa, Megaport, and Telix shares are charging higher today

These shares are ending the week on a positive note. Let's find out why.

Read more »