Stock’s Details

Boyd Group Services Inc.

Business Uncertainty due to COVID-19 Might Hinder Near-term Performance: Boyd Group Services Inc. is one of the largest operators of non-franchised collision repair centres across North America in terms of the number of locations. The Company operates under the brand name of Boyd Autobody & Glass and Assured Automotive in Canada and Gerber Collision & Glass in the U.S.

Key Highlights and Business Drivers:

• During FY19, the Company added 108 locations, while at the same time achieving organic growth through same-store sales which increases 3.3%. The business is targeting an implied average annual growth rate of ~15% through same-store sales and acquisitions.

• The group is seeking optimizing returns from existing operations by same-store sales growth along with expense management through a focus on cost containment and efficiency improvements. Further, the company is also conducting an extensive survey of customer satisfaction across all operating locations to retain its customer satisfaction level.

• The company is the best-in-class service provider in terms of the average cost of repair, cycle time and customer service. The group also hold the industry-leading position in OE Certifications and technician training. 

• The impact of COVID-19 is uncertain while the Management expects its ongoing operations, including staffing, the volume and pace at which collision repair shops can fix damaged vehicles and maybe hindered leading to the temporary closure of facilities.

FY19 Financial Highlights for the Period ended 31^st December 2019: BYD announced its full-year results, wherein the company reported its revenue of CAD 2,283.3 million, depicting a growth of 22.5% from FY18. Adjusted EBITDA stood at CAD 215.6 million, as compared to CAD173.4 million in FY18 driven by growth from new locations and same-store sales. EBITDA margin improved to 9.4% from 9.3% in FY18. The company reported lower net earnings of $64.1 million, as compared to $77.6million in the previous financial year, majorly hit by higher finance costs and higher fair value adjustment costs.

FY19 Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The stock of BYD closed at CAD154.03 along with a market capitalization of CAD 3.11 Billion. The stock made a 52-week low and high of CAD 125.01 and CAD 231.52, respectively and is currently trading close to the lower band of its 52-week’s trading range. The stock has generated a return of 19.40% in the last year. The stock is available at a price to earnings multiples of 42.7x on it trailing twelve months basis. Going forward, the company will continue to seek accretive growth through both organic growth (same-store sales growth) and inorganic growth like acquisitions and new store development, while the company is prioritizing on preserving its financial flexibility amid uncertain impacts of COVID-19. Considering the recent price movement, lower profitability, stretched valuations and uncertainty of COVID-19 impact, we have ‘watch’ stance on the stock at the closing price of CAD 154.01, down 10.34% as on 18^th March 2020, while we look for growth catalysts in the near term.

BYD Daily Technical Chart (Source: Thomson Reuters)

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