Business Strategy and Outlook
| Angus Hewitt |We forecast that Eagers to continue to capture market share in the highly fragmented auto retailing segment. Following the merger with major player and former rival Automotive Holdings, we estimate Eagers now boasts a market share of about 11%. As the largest dealer in the market, Eagers can centralise back-office operations and fractionalise these fixed costs over a significantly larger volume and revenue base, affording a durable cost advantage over smaller peers. Accordingly, we estimate the company earns gross and net profit margins ahead of smaller competitors. We believe Eagers' extensive size and scale should allow it to deliver midcycle profit before tax margins of 3% to 4%.