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Mar 10, 2024

GUD ASX: GUD Holdings shares are up 45 per cent in 10 months as it positions for selling auto accessories which fit electric vehicles, petrol or diesel models.

GUD Holdings will become a pure-play automotive products company with the $65 million sale of pumps company Davey Water Products, as the tow bar, oil filter and trailer parts group positions itself

GUD Holdings will become a pure-play automotive products company with the $65 million sale of pumps company Davey Water Products, as the tow bar, oil filter and trailer parts group positions itself for the rise of electric vehicles.

The under-the-radar company, whose share price has risen by 45 per cent in the past 10 months to $10.11, is repositioning as it tries to future-proof its core automotive parts business.

It will use the proceeds of the Davey pumps sale to reduce debt and reinvest in a strategic shift into higher growth areas, chief executive Graeme Whickman said on Monday.

Utes, 4WDs and SUVs make up 70 per cent-plus of total new vehicle sales in Australia. GUD Holdings is repositioning to grow in parts and accessories that are in demand regardless of whether the engine is petrol, diesel or electric.

“This transaction simplifies the GUD group by becoming an automotive pure play and strengthens the group’s balance sheet by materially reducing debt,” Mr Whickman said.

GUD made a big strategic shift in late 2021 with the $745 million acquisition of Melbourne-based AutoPacific Group, which makes tow bars, roof racks, nudge bars and trailer parts for four-wheel drives, utes and SUVs. Those products are in demand regardless of whether the vehicle for which the accessories are bought has an internal combustion or electric engine.

Mr Whickman said on Monday that GUD had growth aspirations in the segments of 4WD accessories, lighting products, powertrains, under-car products and electric vehicles.

He said GUD would pursue organic growth and also look to make “financially and strategically compelling acquisitions”. Mr Whickman said there was a large pipeline of potential acquisitions, but would demonstrate to the market that AutoPacific Group was a strong business before making any further “transformative” acquisitions.

GUD has owned Davey Water Products since the mid-1990s, but it has been an under-performer for the group.

ASX-listed Waterco has acquired the business. Waterco said on Monday it would add about $120 million in revenue to its overall operations. Davey sells agricultural pumps, pool pumps and chlorinators, and was established in 1934.

More than 70 per cent of new vehicle sales in Australia are either SUVs, utes or 4WDs. GUD is conscious that much of its growth would need to come from products that could be used by buyers of electric vehicles, along with traditional petrol or diesel-powered vehicles.

The two biggest-selling vehicles in Australia over the past few years have been the Toyota HiLux ute and the Ford Ranger ute. Tesla’s Cybertruck, an electric ute with a menacing and futuristic design, is scheduled to go on sale in the United States near the end of calendar 2023, but is some way off from being available in Australia.

GUD’s core businesses sell Ryco oil filters and air filters, Goss fuel pumps and hoses, Narva automotive lighting and electrical parts, and a range of disc brake products.

Mr Whickman is a former chief executive of Ford Australia, the car company that stopped local vehicle manufacturing in Australia in 2017 in a year where rivals Holden and Toyota also ended decades of local vehicle assembly. He took the top job at GUD in 2018.

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