This quiet achiever in the fast-growing ASX auto segment just delivered a record quarter

The inability of Aussies to make travel plans, especially overseas travel, has decimated the Australian travel sector over the past year.

But it’s actually done wonders for the nation’s savings rate.

According to the latest statistics from Treasury, households savings accounts grew by $100 billion over the past 12 months to November. That’s an increase of around $12k per household, and took our savings rate nationally from 2.5 per cent to 19.8 per cent.

The extra money in the pockets has definitely helped Australia avoid a prolonged recession, and allowed people to indulge on discretionary purchases.

One segment that’s been a big beneficiary of the increase in discretionary spend is the automotive sector. Almost all of the automotive-related stocks on the ASX have notched up gains over the past year.

Giants Eagers Automotive (ASX:APE) has returned more than 350 per cent in the last 12 months, and Carsales.com (ASX:CAR) by 55 per cent.

But the sector is not just about selling cars; it includes the whole works that come with owning one, such as spare parts and the aftermarket.

Recently re-listed Sprintex (ASX:SIX), which specialises in the supercharger market, is one to watch out for.  PWR Holdings (ASX:PWH), which focuses on automotive cooling products and solutions, has also seen its share price jump by 70 per cent.

But one company that’s been a genuine quiet achiever is RPM Automative (ASX:RPM). This diversified automotive aftermarket player has gained  more than 230 per cent over the past year, and just delivered a record quarter.

Unlocking potential in RPM Automotive

RPM specialises in the aftermarket segment, which is a $34 billion market out of the broader Australian automotive market estimated at $108 billion.

The company has just reported a record third quarter, with all divisions delivering a solid revenue performance.

Its total revenue increased by 59 per cent to $14.5 million compared to pcp. It also recorded its highest quarterly gross profit of $3.94 million, which was a 49 per cent rise from pcp.

“This was a record third quarter across all divisions for the company, and sets us up well as the economy continues to rebound from the challenges created by COVID-19,” says RPM Automotive CEO and founder, Clive Finkelstein.

RPM’s growth has been partly fuelled by its aggressive expansion strategy, which includes acquiring other players in the market.

During the quarter, it acquired Traralgon Tyre Service, a leading online tyre retail outlet with a network of stores all around the country.

That acquisition followed on the heels of another one back in November, where it acquired wheels and tyre retailer Citic Autoparts, which has since been rebranded to RPM Autoparts.

These acquisitions have helped to strengthen the company’s four main business pillars: motorsports, repairs & roadside, wheels & tyres, and accessories & performance.

“We now have 15 companies across our four divisions,” Finkelstein noted.

“Our customers receive expert advice from our specialist workforce – whether that be racing enthusasists servicing our performance and motorsport customers, or heavy transport experts helping keep our country’s logistics companies on the road 24/7.”

Sure, the company has been a beneficiary of the recent COVID-19 tailwinds, but its growth has long been in the making, with a very well diversified and scalable business model managed by a highly experienced board of directors.

The company is very tightly held, with 60 per cent of its share register owned by its own vendors, management, and the Board.

RMP has also recently outlined a three-year strategy, where it plans to grow both organically and through further acquisitions.

This would potentially see it unlock significant growth opportunities, along with improved earnings.

 

RPM Automotive share price chart:

 

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