Why this expert suggests a “range of additional growth opportunities” for Carsales shares

A handsome, smiling man sits in the front seat of an electric vehicle with his hands on the wheel, pleased that Carsales' share price is rising and that the company will soon pay its largest dividend in its history.

Image Source: Getty Images

the Carsales.com ltd (ASX: CAR) the share price is down 3.83% to trade at $18.59 in afternoon trading.

The broader market is also down today with the benchmark S&P/ASX 200 Index (ASX: XJO) shedding 0.7%.

One expert believes a new acquisition will do great things for the online classifieds company.

Is Carsales stock price a buy?

Limited Active WAM (ASX: WAA) is a listed investment company managed by Wilson Asset Management. Invests in “market price manipulation opportunities in the Australian market”.

For background, Carsales’ stock price is down more than 25% year to date.

In its June 2022 investor update published yesterday, the fund manager said it was positive Carsales exercised its call option to acquire the remaining 51% of the US market business, Trader Interactive.

Carsales operates Australia’s largest online classifieds business for cars, motorcycles and boats. He is also a co-owner of Trader Interactive, which has a leadership position in the RV, powersports, and commercial truck and equipment categories.

Car sales earnings are ‘more resilient’ than the market thinks

In the update, Wilson said the transaction would provide “immediate accretion to low, double-digit earnings per share (EPS), including tax and interest benefits.”

It’s more:

We are positive about this strategic transaction for the business, and the move to 100% ownership in IT is expected to unlock a range of additional growth opportunities for the business.

[The company] also provided a trading update for the month, with fiscal 2022 earnings guidance in line with consensus analyst expectations.

Despite broader macroeconomic uncertainty, the company saw strong momentum across markets in fiscal 2023 and we believe earnings will prove more resilient against market expectations.

Carsales stock price lost about 8% in value during fiscal 2022.

Capital raising completed

In an announcement to ASX today, Carsales said it has completed the retail component of its fully subscribed 4.16 prorated accelerated non-waivable entitlement offering.

Carsales announced the offer to the market on June 27 and closed on Wednesday.

This is the final stage of the total capital raising of $1.207 billion to allow Carsales to purchase the remaining 51% of Trader Interactive for $809 million.

The retail offering was open to approximately 19,000 Carsales shareholders and 8,000 elected to participate.

The offer price was A$17.75 and approximately 10.3 million new Carsales shares were subscribed for. This grossed A$183 million.

Approximately 10.1 million new shares that were not absorbed will be assigned to sub-insurers.

A separate offering for institutional investors had 90% acceptance and those new shares are already trading.

Carsales expects to settle the retail offering on July 19. These Carsales shares will begin trading on July 21.

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