Purchase of Carsales.com Limited (ASX: CAR)

29th September 2022

Across the Elston Growth Model Portfolio of investor accounts, we have bought Carsales.com Limited (ASX: CAR), the leading online portal for automotive listings in Australia.

We are positive on the long-term outlook for CAR for the following reasons:

(Aus) The flagship Australian arm of Carsales.com is a very strong business with a near monopoly market position and a strong network effect protecting it. Over time they have been able to grow revenues at above market rates through incremental improvements to their offering. They see further opportunities in digitisation and making it easier to transact used cars which should drive solid growth medium term.
(Intl) Carsales.com has 3 main international business in South Korea, Brazil and the US. These businesses all have strong market positions and are either the #1 or #2 player in each of their respective markets. Over time they should be able to take the learnings from Australia to develop these businesses further. In time this should translate to strong earnings growth and improve the geographic diversification of the business.
(TI Integration) Over the last 2 years Carsales.com has acquired Trader Interactive (TI) which is a leading online sales platform for RV’s, powersports, trucks and heavy industrial equipment in the US. Similar to the very strong Carsales.com franchise in Australia, TI has a very strong market position but its business model is significantly less developed. Carsales.com should be able to materially improve the earnings of TI over time by modernising the business model. This should lead to improved outcomes for both customers of TI and shareholders of Carsales.com.

The purchase of CAR has been funded through the sale of Origin Energy.

As always, thank you for your ongoing support, and should you require further information, do not hesitate to contact your adviser.

Warnings and disclosures

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