Best Ideas 2018 - Uni-Select Inc. (UNS-T) with Gabelli Analyst Carolina Jolly

Gabelli Research Analyst Carolina Jolly discusses her best idea for 2018, Uni-Select Inc. (UNS.TO)

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http://www.gabelli.com/Gab_pdf/Research/Reports/UNSCN_20171204.pdf

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Transcript:
Hello, my name is Carolina Jolly and I'm the automotive aftermarket analyst at Gabelli. Today, I am going to talk about my best idea for 2018 - Uni-Select.

UNS-T is a 1.4 billion dollar Canadian aftermarket company that distributes automotive parts in Canada and refinish paint in the US.

Closing at 27.20 CAD on January 18th, my sum of the parts valuation suggests that UNS-T is deeply undervalued, while strong industry fundamentals and a transformation story should further drive stock price.

First.
Given recent transaction multiples of 10-11x in the automotive distribution industry, we believe that Uni-Select, which is just trading at 9x our 2019 EBITdA estimates, is undervalued.

As the company has transitioned into a stronger, higher margin business, we see the $860 million automotive distribution segment as a prime strategic target for large, consolidating competitors to enter both the accelerating Canadian and UK markets.

Secondly,
a rebounding Canadian economy, boosted by increasing oil prices and a November jobs number that was 8x expectations should drive replacement demand while we estimate that the UK aftermarket should grow 3-5%.

On the refinish side, we expect icy, snowy conditions along with mobile phone usage to drive YoY growth. We are modeling a 9x EBITDA multiple on this segment which we believe can easily grow to 10x in a rebounding market

And lastly,
Uniselect has announced a strategic plan to grow EBITDA. By Expanding AUTO EBITDA margin by 200 bps from 6% to 8% and closer to peer averages, the company could add $20 million in EBITDA over the next years.

Thus, we recommend investors buy UNS-T with a 2019 private market value of $32 CAD that could easily grow to $34 in the right conditions and a 20% discount to where the stock is currently trading.



Source: Gabelli TV (via YouTube)
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