BCA Marketplace PLC (LON:BCA) has provided a trading update, essentially confirming it is continuing to trade in line with expectations. Our forecast assumptions are towards the top end of the consensus range, and we remain comfortable with this. We also remain comfortable with our original investment thesis, and would expect the shares to perform well over the longer term given the structural growth opportunities that lie ahead on a Pan European basis, which translates into double digit EPS growth through to 2020E.
Trading Update: BCA has released a trading update this morning confirming it continues to trade in line with expectations. The core vehicle auction business continues to utilize its market leading position to drive growth in physical and online channels. Despite talk of increased competition, We Buy Any Car (WBAC) is still displaying double digit growth and continues to meet management expectations. WBAC is clearly benefiting from its scale, but Trustpilot ratings also remain strong as it offers a consistent service. The Automotive Services division continues to progress well following the appointment of new divisional CEO Ian Carlisle. The company has proposed a final dividend of 4.55p per share, which if approved, will result in a final dividend of 6.75p per share, in line with our expectations.
Key investment attractions: We believe BCA offers critical infrastructure to the automotive market across Europe, and anticipate above average growth being generated over the foreseeable future, particularly on the Continent. We also believe BCA Dealer Pro and its wider technology platform, which should now be enhanced with the appointment of a Chief digital Officer, has been overlooked to date. We believe this product has strong strategic value, and will help to improve the quality of earnings and drive volumes across the core business. We see a similar development occurring within UK Buyer Finance, which should also help to improve the quality of earnings from here.
Forecast assumptions: We leave our forecast assumptions unchanged following this update. Our forecasts have been at the upper end of consensus expectations for some time, and we continue to remain comfortable with our assumptions. We expect a 3-year revenue CAGR of 31% through to 2020E with an adj. EBITDA CAGR of 21% over the same period, which we believe is compelling.
Investment view: We remain comfortable with our original investment thesis based on the underlying performance of the business. We continue to believe the growth potential is significant from here across all divisions, especially in Europe in future years. We continue to see BCA as attractive critical infrastructure as it has now touched over 3.5m vehicles in the UK supply chain alone, and would expect to see continued growth under most post Brexit scenarios. With an attractive dividend yield of 4.1% from 2018 and a track record of delivering robust earnings, we would expect the shares to perform well given the unique structural growth opportunities ahead.
