[ET Net News Agency, 17 January 2020] Citi Research said China Yongda Automobile
Services' (03669) acquisition of a Mercedes Benz 4S dealership in Shanghai for RMB258
million implies less than 6x forward P/E.
The research house said this signifies Yongda's broader attempt to balance its brand
portfolio and expand the coverage of Mercedes Benz. The acquisition valuation appears very
cheap and accretive with the P/E multiple lower than the stock's current 6.2x 2020 P/E.
Upon the completion of the acquisition, Citi expects upside to its current 2020
estimates and target price of HK$14.3 could be lifted by 2-3%, awaiting further details.
Citi expects Yongda's shares to re-rate in 2020 due to Yongda's number of Porsche
dealerships will equal Zhongsheng Group's (00881) Lexus, and Yongda's BMW sales
volume in January so far appears to be very strong.
Citi said the market has not recognized Yongda's stronger and more defensive top-line
growth potential as well as the consequent faster growth in after-sales gross profit in
the next 2-3 years. It maintained its "buy" call on Yongda. (KL)