Ritchie Bros. – Better Performer Than You May Think

RBA - Ritchie Brother AuctioneerRitchie Bros. is a global asset management and disposition company, offering a buying and selling platform for used heavy equipment, trucks and other assets to its customers. It is the world’s largest auctioneer of heavy equipment and trucks with USD $4.9 billion in Gross Transactional Value (GTV).

Ritchie Bros. is trusted worldwide for its fair and transparent dealings and leading customer service. Some of the most popular items that the company deals in are construction machinery, farm equipment, agricultural tractors, and cranes.

Ritchie Bros. operates through its multiple onsite and online selling platforms like Ritchie Bros Auctioneers, IronPlanet, Private Treaty, and Salvage Sale. The company has operations in more than 15 countries and has over 40 permanent auction sites in North America, Europe, the Middle East, Asia, and Australia.

The company offers sector-specific solutions plus equipment financing and leasing through Ritchie Bros. Financial Services. It also provides other services like shipping, insurance, warranties, refurbishing, free auction sales, etc. By GTV, construction equipment is the largest (accounting for 57% of 2018 GTV), followed by transportation (17%), agriculture (9%), oil & gas (2%), GovPlanet (1%) and others (13%).

Investment Data

Revenue Growth & Market Exposure

Over the last six decades of its existence, Ritchie Bros. has built a solid reputation as the most trusted equipment auction company in the world. As a result, the company enjoys deep customer relationships. Ritchie Bros. offers a wide range of used and unused equipment in construction, mining, transportation, agriculture, oil & gas, lifting and material handling, and forestry and other industries. It has successfully grown its gross transactional value to USD $4.96 billion today, from just USD $462 million back in 1990.

Ritchie Bros. connects equipment buyers and sellers through a global network of auction facilities and online sales channels. The company has a huge online presence with more than 5 million average monthly website users. About 59% of its GTV is purchased online across all channels. Its sector-specific selling channels include GovPlanet, specializing in rolling and non-rolling government surplus, TruckPlanet, and Kruse Energy Auctioneers, as well as Ritchie Bros. Financial Services.

Ritchie Bros. provides multiple solutions for customers across many industries and offers buying and selling solutions both online and onsite. The company is highly diversified by geographies, industries, and product solutions. Over the years, Ritchie Bros. has established itself as a one-stop shop offering multiple disposition services and solutions to address its customer needs and render maximum value for them.

Dividends

Ritchie Bros. has compounded its dividend growth at 7.5% per annum over the last decade. Its most recent dividend hike was 5.9%. This Canadian Dividend Aristocrat has an annual dividend yield of 2.1% and returned $76 million in dividends to shareholders in 2018.

Ritchie Bros. has been expanding both organically and through acquisitions. The company is witnessing growth not only in its core auction business but also across complementary solutions. The acquisition of IronPlanet back in 2017, solidified Ritchie Bros. position as a multi-channel asset disposition company. Ritchie Bros. is experiencing solid growth in its online channels; services; and in the U.S., Canada and international markets. Caterpillar alliance and contracts through GovPlanet act as additional growth drivers for the company.

Ritchie Bros. has significant room for future growth with the company’s GTV accounting for a mere 1.5% of the estimated global used equipment market, which is worth $300 billion.

Ritchie Bros. should continue to benefit from its growing multi-channel, trusted solutions that are transparent as well as convenient for its customers. Its unparalleled technology and data-driven asset management platform which is a fully integrated, cloud-based software allows clients to manage their equipment portfolio conveniently and connect them with the global buyer network. In addition, the company has also launched Marketplace-E to scale up in the international markets and the management expects significant growth from it in the future. Global scale, reach, loyal client relationships and deep industry insights are strong competitive advantages for Ritchie Bros.

Competition

Ritchie Bros. competes in a highly fragmented multi-billion dollar market, with many smaller competitors. As a result of advancement in technology, online competition has also emerged. Fuelled, a Calgary-based online marketplace for oil and gas equipment is a huge competitor for Ritchie Bros. Ritchie also faces intense competition from traditional auctioneers such as Proxibid, Auctiontime, Machinery Auctioneers, Invaluable, LiveAuctioneers, NextLot, Bar None Auction, BidSpotter, Bidsquare, and Jeff Martin Auctioneers.

Bottom Line

What started off as a family furniture store sixty years earlier, grew into the world’s largest industrial equipment auctioneer with a presence in more than 20 different countries. As the world’s most powerful equipment auction platform, Ritchie Bros. is in a good position to cater to the $300 billion global used equipment market through its global network and buyer marketing. The company’s investment in technology, asset management solutions, e-marketplaces, and customer-centric solutions should help it scale to new heights.

There is nothing to be excited about the business but it works. Technology will allow the company to compete globally and reduce cost for higher efficiency.

RBA vs Indexes

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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