The online car classifieds shares you should hang on to
Key statistics: ASX: CAR
Closing share price 15.08.17: $13.750 52-week high: $13.935 52-week low: $- Most recent dividend: 21.5c Annual dividend yield: 2.98% Franking: 100%
Carsales managed to shrug off potential problems in its finance division and Brazilian business in 2017. And this year looks as if it will be the company's best for a while.
Of Australia's three major online classifieds companies, Carsales.com has produced the worst total shareholder return over the past five years. Though at more than 15% a year including dividends, shareholders aren't complaining.
Carsales managed to surprise us by tweaking pricing more than expected during the half, introducing tiered pricing, meaning that higher-priced cars cost sellers more to advertise. If the company can tweak pricing more regularly, it bodes well for future revenue growth.
Elsewhere, while EBITDA (earnings before interest, tax, depreciation and amortisation) in the Carsales finance division fell 34% to $10.5 million, the worst appears to be over.
Better still, the company's more advanced international businesses - SK Encar in South Korea and WebMotors in Brazil - are flying. While the international business remains small compared with that of its peers, we suspect international growth will become a bigger focus for new chief executive Cameron McIntyre.
With the growth outlook having improved, we're lifting our recommended "buy" price from $10 to $11 and our "sell" price from $15 to $16. It's not enough to earn an upgrade, though, so we're sticking with HOLD.