AA PLC (LSE:AA)
Opportunity:
- Long-time market leader in UK roadside assistance.
- Very little competition (RAC, Greenflag) in durable, niche industry.
- Incredibly predictable, high return on capital business.
- Strong competitive advantages: high customer retention, high switching costs, strong brand, excellent economies of scale / high barriers to entry.
- Normalized FCF ~315MM; EV 3.440B; FCF / EV yield of 9.1%.
Risks:
- Highly leveraged after sale by private equity owners.
- Mature, slow growing industry.
- Exposure to loss of insurance referral business in the future (autonomous vehicles).
- Recent management turnover.
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