BC Business
Profits were up 273 percent over the first half of the year, mostly on vehicle sales
The stock: Is the economy looking up or turning down? In the past, a good indicator was sales volume at Burnaby-based Ritchie Bros. Auctioneers, now known as RB Global (TSX,NYSE:RBA). The company was famously countercyclical because it dealt in used heavy equipment that construction and resource companies were likely to unload whenever they were in financial difficulty or saw trouble ahead. But since the company’s takeover of used car fleet liquidator IAA 18 months ago, the signals it sends out are not so clear.
Material change: In fact, it’s the car division that now seems to be in the driver’s seat with respect to RB Global’s growth and profitability prospects. Not only has the company achieved a reported US$110 million in cost synergies as a result of the merger, it boosted gross transaction value in the automotive segment 69 percent over the first half of 2024 compared to a year earlier. (Equipment sales were up a more modest 19 percent.) Net income over the same period rose a whopping 273 percent, mostly due to improved profitability in cars.
Unlike the used backhoe business, where RB Global is the clear market leader, the vehicle sales division faces a strong competitor, Copart (NASDAQ:CPRT). Under RB Global’s ownership, IAA has closed its performance and valuation gap with this market leader, however, which gives analysts hope RBA stock can chalk up still higher earnings multiples in the months and years to come.Closing at $111.09 Tuesday (October 8) on the Toronto Stock Exchange, RB Global stock is up a solid 25 percent year to date.
Word on the street: “Tough construction equipment comps are generally well understood by the market when it comes to the short term, but the ultimate upside resides within the IAA business at the moment,” wrote National Bank analyst Maxim Sytchev this week. He has an “outperform” rating and US$90 (C$122.83) target on RBA shares.
Coming and going: The board and management of Vancouver-based SilverCrest Metals (TSX:SIL; NYSE American: SILV) have agreed to a takeover offer from Coeur Mining (NYSE:CDE) of Chicago. The all-share deal represents an 18-percent premium over SilverCrest’s 20-day weighted average price to October 3. SIL has more than doubled in value over the past 12 months, with the company’s market capitalization now close to $2 billion.