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If things go right for Haynes (LSE:HYNS) its shares could easily bounce from the current £1.25 to the level it was a few years ago, making it a multi-bagger.
But we need to acknowledge there is serious downside risk. Here are some of the things that could go wrong.
•Continued slide in manual sales
Even after half a decade of decline there is no solid evidence of a halt. People are finding alternatives to buying a manual and doing work for themselves. This trend might continue until it becomes uneconomic for Haynes to strip down cars/motorbikes and create diagrams, instructions and videos for manuals.
Then the manual side of this Group will have only its legacy assets of 2,500 manuals selling to diehards of the ancient art of DIY. Judging by the comments on bulletin boards many investors believe that this kind of slow death or zombie existence is the company’s destiny.
But then, you have the fast growing professional business and, surely, value can be had from the, admittedly aging, back catalogue of manuals?
•HaynesPro is superseded by a competitor
It’s possible, but is it likely?
The main competitor currently is Autodata, a £150m business owned by a private equity company.
Some comments on mechanics’ discussion board on the value of the two databases used by independent UK mechanics:
“costs me £60 per month……Its an automatic renewal each year for me as I would not get the wiring diagrams for each manufacturer for the same cost. It’s the lesser of two evils, you either have it and make some money or you make some money and struggle along the way to make it without it”
“£750 over 12 months is £62.50 a month. Compare that to the labour you save against wild goose chases around various google results. It’s a fair chunk of wedge, but it’s not a five minute job to compile that data.”
“The data used on UKAT Workshop Data is Haynes Pro, the same data used by e3technical (CarWeb) and previously AutoVista”
“gave up using Autodata a few years ago and to be honest I have managed without them. One thing I really like about Autovista and this new UKAT Workshop data is being able to log on anywhere I need. As I work by myself I am not bothered about multiple log ins but do not like being tied to one computer.”
“I am currently subscribed and paid up with Autodata and Carweb[autovista via UKAT] I am also extremely unhappy with Autodata”
Players in overlapping markets include Bosch ESI (mostly for wiring diagrams), Hella Gutman Solutions (mostly diagnostic tools) and TecRMI (mostly parts)
It seems to me that HaynesPro and Autodata dominate the European market and are constantly widening their competitive moats by improve……..To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
