The MotorCycle Holdings Ltd (ASX: MTO) share price has raced 7.5% higher this morning after giving an update.
About MotorCycle Holdings
MotorCycle Holdings owns and operates a number of motorcycle dealerships and retail accessories outlets that sells new motorcycles, used motorcycles, accessories and parts, finance, insurance and warranties. It also does service and repairs. It has a total of 48 franchises operated from 31 dealerships and 8 retail locations.
What was today’s exciting announcement?
The motorcycle business expects to report underlying EBITDA (EBITDA explained) of between $23 million to $25 million for the first half of the 2021 financial year.
The business explained that underlying EBITDA includes interest and amortisation on leased properties as an expense to enable comparison to prior periods when lease expenses were included – this relates to the recent AASB 16 Leases accounting change.
However, given the exceptional trading circumstances due to COVID-19, Motorcycle Holdings’ management said that care should be taken using this year’s results as a guide for future performance.
It was less than two months ago that the underlying revealed to investors that it was expecting to generate EBITDA “in excess” of $20 million for the first half.
How did MotorCycle Holdings do this?
As well as cost cutting measures undertaken during the pandemic, the company’s result has also been boosted by various government stimulus measures, including jobkeeper program. However, MotorCycle Holdings hasn’t qualified for the jobkeeper program after the initial jobkeeper period ended in September.
I’d guess that whilst people have been limited in their international travelling, local travel has seen a big upswing. I can see why motorbike demand would be high. Anecdotally, caravan demand is also much higher as more people look to spend their holidays within their country/state.
Is the MotorCycle Holdings share price still worth buying?
FY21 is clearly going to be a strong year for the business. But FY22 is unlikely to be as good – you don’t need to buy another motorbike a year after you buy your last year.
It’s hard to say what the long term demand for MotorCycle will be like, so I’d prefer to leave investing in its shares to other investors. Perhaps Bapcor Ltd (ASX: BAP) might be a better bet. But it’s hard to look beyond one of my favourite ASX growth shares, Pushpay Holdings Ltd (ASX: PPH).
