[ET Net News Agency, 30 October 2019] Jefferies Research initiated coverage on China
Yongda Automobile Services (03669) with a "buy" rating and target price of HK$8.1.
The research house said Yongda's dominance in local markets helps mitigate the risk of
squeezed service fees. Management is scaling back diversification initiatives and focusing
more on a new car dealership. The recent acquisition of four more stores (the first
acquisition in 18 months) expands the network to new territory in terms of franchised
brand and geography, which is a positive signal that management is seeking growth in core
dealership business.
Jefferies said the company has been growing in a pattern similar to Zhongsheng's (01728)
until now. The future growth relies on whether management will be determined to implement
larger scale of acquisitions, which may replicate Zhongsheng's growth in the past.
Jefferies believes any more aggressive M&A will be a catalyst for stock re-rating. (KL)