Is MotorCycle Holdings (ASX:MTO) Worth Buying?
Jason McIntosh explains why MotorCycle Holdings (ASX:MTO) could be a stock to buy now. It’s an ASX small cap that’s been benefiting from a lift in recreational spending. This interview appeared on Ausbiz on 10 May, 2021.
Host: So you've got your algorithms looking across the market for price trends. Talk to us about what's on your radar right now.
Jason: When we think of winners during COVID, first thoughts often jump to the buy-now-pay-later firms, tech companies, and online retailers. But another big winner has been a motorcycle retailer. The company has been benefiting from a rise in demand for recreation and leisure products.
MotorCycle Holdings isn’t what you’d call a household name. It’s got a market cap of $170 million, and it’s not in the All Ordinaries. I’m sure most people don’t even know it exists. But as is often the case, some of the most interesting opportunities are outside the top companies.
MTO came to my attention through Motion Trader’s daily momentum scans. I hadn’t heard the name before, so I immediately went to check it out on the chart.
The first thing that got my attention was that the shares were breaking upwards. They had been trading in a large range since October, and the breakout was a sign of momentum returning.
Another positive sign was that the upward break was on increasing volume. This is often a positive indicator that signifies increasing interest in a stock.
Motion Trader doesn’t consider a stock’s fundamentals. The entry and exit signals are purely based on movements in the share price. But when you look behind the momentum, you can find some very interesting stories.
Take MTO for instance. It operates from 41 locations across Queensland, NSW, Victoria, and the ACT. The company’s business is all things to do with motorbikes: New and used sales, parts and accessories, servicing, finance, and insurance.
And business is booming…
First half new bike sales were up 30%. Management says this was partly due to new products and more dealerships. But what caught my eye was that they’ve increased market share (12.1% of national new sales), which says to me that management have a strong strategic path forward.
And you just need to look at the numbers to see this…
Revenue was up 23% to $218.4m, and net profit after tax was up 258.3% to $17.2m.
Another standout figure was the company’s profit margin of 29.6%. Management says this is largely due to permanent operational improvements and cost cutting (which is the silver lining for many companies coming out of COVID).
Another takeaway is a strong balance sheet. They’ve paid off all debt and have $7.6m in the bank.
The company recently paid a 10 cent interim dividend. And depending on the final dividend, the company looks to be yielding over 5%.
Finally, some of the directors have recently been buying stock.
MotorCycle Holdings ticks several boxes… it has a good fundamental story and positive share price momentum. has the potential to do well over the next couple years. We believe it has the potential to do well over the next couple of years.
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I'm Jason McIntosh, the creator of Motion Trader. My career began in 1991 on the trading floor at Bankers Trust. Nowadays, I trade my own systems from home in Sydney.
Motion Trader is for investors who value robust analysis, data driven entry and exit signals, commentary, and education. I use engineered algorithms to identify when to buy and sell ASX stocks. No biases or guesswork, just data driven signals.