Weekly Buy Report: Car Sales (CRZ)


Weekly Buy Report: Car Sales (CRZ)

Weekly Buy Report: Car Sales (CRZ)

Carsales.com Limited (CRZ) is an Australian business offering online access to automotive classifieds.

It is the largest consumer website in the country that covers automotive, plant machinery, motorcycle, caravan, marine and

display advertising.

Revenue is principally derived from online advertising, which includes dealer and private sales, and display adverting, where

corporate customers such as insurance companies place ads on CRZ’s website.

The group also has a data and research services division, which provides solutions to customers including importers, dealers

and industry bodies.

Industry leader

CRZ prospers even in uncertain economic times because it has been at the forefront of the continuing migration from print to online advertising.

Being proactive in identifying market trends has helped CRZ maintain leadership in its market.

Although the online advertising industry has low barriers to entry, CRZ’s trusted brand and new product offerings are key

reasons it has been able to stay ahead of the pack.

Reflecting this point, 75% of the time looking at auto ad websites was done on a carsales-owned site, this according to CRZ’s 1H12 results presentation.

1H12 earnings

CRZ’s 1H12 results continued a pattern of robust earnings and revenue growth.

For the most recent half, net profit rose 20% on-year to $27.6 million. Revenue was up a similarly healthy 22%.

CRZ declared an interim dividend of 11.3 cents per share, up from 9.4 cents in 1H11. Since FY07, half year net profit has increased at a compound annual growth rate of 40.6%, whilst revenue has grown at 28.9%.

Dealer revenue growth of 16% was delivered on the back of a steady increase in used vehicle enquiries and strong growth in new vehicle enquiries.

Private ad growth was up a more modest 7%, but with the release of new product initiatives throughout the half, coupled with a premium price rise in November, CRZ is well positioned for the second half.

Outlook

Following a buoyant first half, CRZ forecast a similarly strong second half.

The group maintains a dominant share of the online car ad market, and with new product initiatives lined up for 2012, is unlikely to relinquish its grip any time soon.

CRZ is cashed up, and with no debt, has the flexibility to pursue external growth opportunities and support its dividend. Whichmakes it a stock to watch in the future.