KAR

KAR Auction Services

Consumer


Presented:11/20/2013
Price:$28.03
Cap:$3.89B
Current Price:$15.85
Cap:$1.72B

Presented

Date11/20/2013
Price$28.03
Market Cap$3.89B
Ent Value$6.21B
P/E Ratio31.08x
Book Value$10.95
Div Yield2.9%
Shares O/S138.83M
Ave Daily Vol1,470,000
Short Int0.96%

Current

Price$15.85
Market Cap$1.72B
KAR Auction Services, Inc., together with its subsidiaries, provides vehicle auction services in North America. It operates in three segments: ADESA Auctions, IAA, and AFC. The ADESA Auctions segment offers whole car auctions and related services to the vehicle remarketing industry through online auctions and auction facilities. This segment also provides value-added services, such as auction related, transportation, reconditioning, inspection, title and repossession administration and remarketing services. The ADESA Auctions segment sells its products and services through commercial fleet operators, financial institutions, rental car companies, new and used vehicle dealers, and vehicle manufacturers and their captive finance companies to franchise and independent used vehicle dealers. The IAA segment offers salvage vehicle auctions and related services that facilitate the remarketing of damaged or low value vehicles designated as total losses by insurance companies and charity donation vehicles, as well as recovered stolen vehicles. This segment also provides inbound transportation, titling, salvage recovery, and claims settlement administrative services. The AFC segment offers floorplan financing, a short-term inventory-secured financing, to independent used vehicle dealers. As of December 31, 2012, the company had a network of 67 whole car auction and 163 salvage auction locations, as well as serviced auctions through 104 locations.

Highlights

The presenter believes KAR Auction Services (KAR) is capable of growing its top line in the high single digits (%) and generating 20%+ FCF yield, and the 3.5% dividend pays investors to wait for the market to re-rate the stock. He is long shares and outlined the drivers of the business that support his thesis that 10x his 2015 FCF per-share estimate of $3 is too cheap for a “high quality business.”

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