The Armchair Trader watched the Kamux [HEL:KAMUX] Q3 results and webcast call on November 13th. We have followed Kamux Suomi Oy since the summer of 2020, but not until this report have we believed this story has legs outside Nordic region. The used car market in which Kamux is active, is valued at €100 billion in Europe alone. Kamux has a turnover now close to €800 million a year, at a 12% profit per car.
Kamux has been relatively successful since it was listed in May 2017 at around €7.50 a share. Kamux stock traded at between €5-8 until March 2020. The 52-week range is 5.14 – 13.56. Kamux stock closed at €12.6 on Tuesday December 15th, 2020 at time of writing. The All Time High (ATH) for the stock is €13.56. Market cap is €504 million euros with a P/E of 22.46.
Conservative analysts in Finland fail to understand growth companies
Five research houses in Finland follow the stock – the consensus target price is €14, well below what we think it is worth. We believe the company has just begun executing Kamux’ long-term plan of northern European domination in the used car market. With greater equity coverage this hidden gem could well exceed the conservative Finnish analysts’ previous targets of around €11 and now a €14 price target. The company would benefit from more international exposure outside the Finnish market, as it has an excellent story.
The used car market is very fragmented in Finland, Sweden and Germany – most dealerships are family run and small. Most sales are new cars and used cars are usually treated as not really wanted but necessary trade ins. Kamux is different since CEO Juha Kalliokoski has learned the business from ground up. Working in the dealership at VW he learned that used cars were not managed profitably in car dealerships.
Kalliokoski established the first Kamux store in 2003, the following year his second, and as they say – the rest is history. The company has grown to cover three countries (Finland 50, Sweden 20 and Germany 8) with 78 stores. Kamux has also expanded with a lot of small M&A deals over the years. The real difference was it was able to grow outside Finland and over the last quarter the growth was positive even in Germany. This is significant. Many growth companies are good growers in their national market, but only the great companies travel well to other countries.
Kamux Corporation’s Interim Report for January 1 – September 30, 2020
Kamux Saw Strong and Very Profitable Growth – Revenue Growth +13.5% and Adjusted Operating Profit +44.0%
The figures in parentheses refer to the comparison period, i.e. the same period in the previous year, unless stated otherwise.
July-September in brief
- Revenue increased by 13.5%, totaling EUR 207.4 million (182.8)
- Gross profit increased by 26.3% to EUR 28.9 million (22.8), or 13.9% (12.5) of revenue
- Adjusted operating profit (EBIT) increased by 44.0% to EUR 12.4 million (8.6), or 6.0% (4.7) of revenue
- Operating profit (EBIT) increased by 41.1% to EUR 12.1 million (8.6), or 5.8% (4.7) of revenue
- The number of cars sold increased by 12.2% to 17,285 cars (15,409)
- Like-for-like showroom revenue growth was 3.1% (9.6)
- Earnings per share were EUR 0.23 (0.16)
January-September in brief
- Revenue increased by 8.7%, totaling EUR 525.3 million (483.1)
- Gross profit increased by 13.7% to EUR 67.7 million (59.6), or 12.9% (12.3) of revenue
- Adjusted operating profit (EBIT) increased by 15.9% to EUR 23.2 million (20.0), or 4.4% (4.1) of revenue
- Operating profit (EBIT) increased by 19.2% to EUR 23.8 million (20.0), or 4.5% (4.1) of revenue
- The number of cars sold increased by 9.5% to 44,924 cars (41,037)
- Like-for-like showroom revenue decline was -4.6% (2.8)
- Earnings per share were EUR 0.45 (0.36)
The business acquisition of Autosilta was concluded on January 9, 2020.
As published in a stock exchange release on March 20, due to the corona pandemic, it is not likely that Kamux will reach its medium-term targets this year. Kamux will release the Q4/2020 results February 26th, 2021.
The market for Kamux
As previously stated the market is very fragmented and consolidation is the key and with a public company you can use the stock and cash to do it. Over 30% of Kamux sales people and managers own Kamux stock and are highly motivated to increase their sales.
In Nordic companies commission only remuneration does not work. The trick is that when the sales people see that while there is little basic salary (for basic security needs they need €880/month) there is NO cap on earnings they can earn if they are very successful. Base salary plus commission at Kamux runs at an average of €3,850/month, while the average salary in Finland is €3,300/month. Higher earners at Kamux are making €20,000 a week. It is up to a sales person to make as much as he/she needs or feels is enough per month. Kamux is using recruitment mostly from outside established car sales dealerships and training their own staff from scratch.
The CEO Kalliokoski (50 years old) is highly motivated and promising strong performance over the years. As the main owner of the stock (over 15%) he is driven to achieve his goal to be leading used cars sales dealership in Europe. The key is using the internet and physical stores combined with the best inventory turnaround in the business with best trained/motivated sales force.