Weekly Reports | Sep 22 2021
This story features EAGERS AUTOMOTIVE LIMITED, and other companies. For more info SHARE ANALYSIS: APE
By Tim Boreham, Editor, The New Criterion
That’s the ticket: how investors can snare a prime parking space ahead of the post-pandemic motoring revival
As the pandemic lockdowns grind on, investing in the car parking sector looks a decidedly dead-end option given the expanses of vacant lots across the affected regions.
The situation is unlikely to change until Sydney and Melbourne office workers – who account for 80% of usage – are allowed to return to their cubicles.
“The industry is on its knees and it is being crippled by federal and state government policies,” says industry group Parking Australia CEO Stuart Norman (a reference to car parking levies and fringe benefits tax).
So why invest?
Come Freedom Day, things are likely to change dramatically as motorists shun ‘dirty’ public transport in favour of the automobile.
This trend is also borne out by the surge in used car demand, to the benefit of the listed car dealerships Eagers Automotive ((APE)), Autosports Group ((ASG)) and the recently-listed Peter Warren Automotive ((PWR)).
Parking Australia cites a Californian study showing that even as restrictions eased in 2021, public transport patronage was -40% below pre-plague levels and unlikely to recover fully.
A survey of 226,000 users of Los Angeles’ Metrolink showed that 45% of germ-wary users intended to cut out patronage altogether or reduce it to one day a week.
True, LA is a great big freeway. But Parking Australia says that Australian car ownership levels are similar to California’s. “It’s not hard and fast but there’s a parallel to be drawn here,” Norman says.
The evidence is borne out by Smart Parking ((SPZ)), which in Britain manages 720 car parks on behalf of clients such as The City of Westminster, Cardiff Council and the London Underground.
In the month of February, the company dished out 10,000 parking breach notices (PBNs) to hapless motorists outstaying their welcome. In March – when schools returned – the number rose to 15,000. In July, which straddled July 19 “Freedom Day” when all covid restrictions were lifted – violations soared to 41,885.
In the UK, car park operators have more legal backing to dispense such ‘fines’ than here. Locally, Smart Parking provides technology-based services (such as automatic number plate recognition and overstay sensors) to myriad local councils.
Overall, the company reports that demand is “at or around pre-pandemic levels”
The turnaround was reflected in Smart Parking’s recent full year results with revenue declining -4% to $20.7m, but adjusted underlying earnings coming in at $2.2m compared with a -$900,000 loss previously.
The technology arm swung from a -$1.7m loss to a $278,000 profit.
Smart Parking shares have surged 32% in the last six months and 125% in the last year, valuing the company at around $80m.
With a similar market cap to Smart Parking, internet-of-things play SenSen Networks ((SNS)) also plays in the parking management sector, with its technology that extracts data from video (such as number plates) in real time.
Ten years ago, SenSen won NSW’s Roads and Marine Services as its first commercial customer, to operate its emerging network of ‘point to point’ speed cameras.
SenSen then modified the product for parking enforcement and it is used by a number of local authorities including Brisbane City Council and, further afield, the City of Calgary and Edmonton in Canada.
The company also has security surveillance contracts with casinos, airports and shopping centres.
In July SenSen completed the purchase of Scancam Industries, which provides service station surveillance to stop motorists from filling up without paying.
SenSen boosted revenue by 47% to $5.5m in the year to June 30, with the reported loss improving to -$2.97m from a -$3.7m deficit previously.
The shares have climbed 44% in the last year but are still 23% shy of their October 2017 listing price.
Here’s an even more offbeat listed exposure to the car park recovery story.
The Perth-based minnow has perfected a modular pre-fabrication method by which car parks of up to six stories high can be erected within weeks, either temporarily or permanently.
The lightweight concrete beams are added, Lego-like, to create the flexible structures.
Parkd doesn’t have much of a balance sheet but has entered a compact with the listed Axiom Properties ((AXI)) to scour for opportunities. Put simply, Axiom provides the expertise while the fund manager puts up the dough for projects across the healthcare, transport and education sectors.
“Parties are coming to us and saying we want a car park but we don’t want to pay for it,” says Parkd CEO Peter McUtchen.
“But we have some land so we will essentially give it to you for free for the term of the lease.”
The duo proposes a car park for the University of South Australia on college land in Adelaide’s CBD, but the wheels of academia turn slowly.
Tapping the pandemic recovery theme, Parkd has proposed a temporary car park in Melbourne’s Docklands, incorporating features such as automatic temperature screening of commuters.
In Perth, Parkd has built a facility for a Subaru dealership in Victoria Park, with a couple more subject to development approval.
The company provides pre-feasibility consulting work for St John of God’s Sydney hospital and Melbourne’s suburban rail loop project.
Parkd is also delivering advice for the Federal Government’s $300m railway station commuter car park scheme, which was mired in allegations of marginal seat pork barrelling.
Parkd’s counsel helped cement funding for two car parks in Penrith, with the modular approach enabling them to be built at a much lower per-bay cost than usual.
“We feel confident they will go to a revised list of stations,” McUtchen says. “The government will try to redeem the program to what it should have been in the first place: on a needs basis and not a political basis.”
Parkd has had a patchy corporate life since raising $6m at 20 cents apiece and listing in late 2017, including the obligatory stoush with a major shareholder.
Now trading at less than 4c a share with a $4m market cap, the company managed to raise $1.25m of equity in April. But its existence depends on “achieving continued development success as well as future funding and customer engagement.”
Parkd is chaired by Bronte Howson, who ran the listed car dealership Automotive Holdings (acquired by AP Eagers to form Eagers Automotive).
“It’s an intriguing one for investors,” McUtchen says of his company. “We have been through a fair amount of early-stage company dramas but we have stuck to our guns.”
Disclaimer: Under no circumstances have there been any inducements or like made by the company mentioned to either IIR or the author. The views here are independent and have no nexus to IIR’s core research offering. The views here are not recommendations and should not be considered as general advice in terms of stock recommendations in the ordinary sense.
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For more info SHARE ANALYSIS: APE - EAGERS AUTOMOTIVE LIMITED
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