Asbury Automotive Group (ABG), mcap=$4bn, price $179 vs $151

$ABG pitch:
– The fifth-largest franchised automotive dealer in the US.
– Investment thesis based on several industry-wide and company-specific factors.
(1) Fears regarding EV transition overblown – manufacturer won’t switch to DTC model and dealerships are here to say.
(2) Dealers are not over-earning – gains from used vehicle sales are offset by decreased new car sales.
(3) ABG normalized margins are materially above 2019 levels.
– ABG is the best-in-class operator with margins and operating KPIs that consistently exceed other publicly traded dealership groups.
– Admirable track record of capital allocation, reducing share count by nearly a third since 2010 while adding ~60 net new dealerships (out of 148 current total).

$ABG valuation:
– Expected to reliably generate $30-$50/share in FCF over the coming years.
– Worth more than the 3x-5x multiple the market is currently offering.
– Real estate portfolio likely worth $1.5bn or a quarter of the current TEV.

Exp. gain: Not specified.

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