First Quarter Report for 2018

Slattery Asset Advisory

Key Point Summary
  • Slattery Asset Advisory is excited to have officially launched our new Asset Recovery business, which has been running since its soft launch 6 months ago. Run out of secure premises in Villawood the business is managed by Ahmet Ozcelik together with Michelle Hibbert and provides a snapshot of the future direction of Slattery Asset Advisory. The business essentially co-ordinates the late cycle credit recovery and asset re-marketing processes for Major Banks and Financiers, allowing them to free up staff and concentrate more on their customers. We have had a lot of interest from the industry to learn more about these services.
  • Operating on a leading edge, global CRM platform with dedicated, secure portal access, the business is expanding and rapidly moving from launch into the growth phase.
  • During the quarter the team have been particularly active on a national basis with a significant focus on valuing mining equipment, aircraft and marine craft. Cranes also feature quite frequently with the ongoing infrastructure spend across most major cities.
  • A further extension of the day to day valuation process included the development of a secondary market guide for Lenders, providing depreciation schedules over a broad range of equipment and identifying the variations between major and lesser brands. For lenders this provides a good level of comfort in designing optimal funding structures for their customers.
  • As part of the ongoing expansion of the Slattery Valuations team we are pleased to welcome new Valuers Alex Leahy (Queensland), Keith Ossendryver (Victoria) and Heath Burriss (Victoria).

Major Onsite Liquidation Auction

This quarter saw one of our biggest auctions with the liquidation of the assets operated by Ostwald Brothers in Dalby, South East Queensland. The success of the auction has set the benchmark for the industry for the year ahead with some incredible results achieved on the day.

The lead up to the 2 day auction generated interest from all across Australia as well as generating interest internationally. The attendance at the auction on the day saw thousands of interested buyers attend inspections and over 1,000 buyers register and physically attend onsite where they competed against a very active buyer group online with another 600 buyers registering and bidding online.

All classes of road transport and earthmoving assets exceeded expectations at the auction and the smaller pieces of machinery and sundry goods generated well in excess of their estimated amounts.

The results achieved at the auction and the response from both domestic and international buyers highlights two key factors; 1. There is massive demand currently for quality road transport and earthmoving assets; and 2. The major event style auction if executed properly will generate a premium for these asset classes generating greater returns for vendors.
interested buyers attend inspections and over 1,000 buyers register and physically attend onsite where they competed against a very active buyer group online with another 600 buyers registering and bidding online.

 

Road Transport

Key Point Summary
  • 2018 has started strongly with record sales numbers exceeding the previous record set in 2008.
  • Kenworth continues in its market leading position with the highest number of units sold YTD for 2018.
  • Victoria has had the greatest demand for new assets.
  • Tipper truck and dog tipping trailers are in incredibly high demand pushing up values in the secondary market.
  • WA has a strong demand for heavy duty trucks but is suffering from lower supply.
  • Medium duty Japanese trucks remain in high demand across the country with no major change over the previous year.

New Trucks

The first three months of 2018 saw record new truck sales that have come together to produce a new first quarter heavy vehicle mark in Australia.

Year-to-date a total of 8,675 trucks and vans have been delivered in Australia – an increase of 1,517 units over this time last year, up 21.2%. It also eclipses the all-time sales record set in Q1 2008 where 8,267 trucks were sold in January through to March, by 408 vehicles, a 4.9% increase.

The Heavy duty market was up 20% in March and up 37% overall for the year to date in 2018. Kenworth is the year to date market leader with 19% market share (551 units) followed by Isuzu at 15% (427 units) and Volvo 3rd with 13% (386 units).

The strongest market in March for heavy duty sales was Victoria (329 units) followed by Queensland (309) and NSW (298). WA continued its recovery in 2018 with 132 units delivered in March and Volvo led the market for total sales with 54 units sold representing 18% of the market.

Over all Volvo Group Australia (Volvo, Mack and UD trucks) maintained its heavy duty market lead for the year to date with 25% market share ahead of Paccar (Kenworth and DAF) on 21.8%.

The medium duty truck market remained largely unchanged in brand dominance with Isuzu continuing its market leading position with 34% market share (614 units) from Hino with 27.3% (482 units) and Fuso in third place with 15.6% (275 units).

 

 

 

 

Used Heavy Truck Sales

 

The standard for sales results achieved for the heavy duty market was set with Slattery’s major onsite auction in Dalby in March, which showed the strength in the market at present for quality assets despite the increased volume of assets coming on to the market. These results also underpinned the strength of a large scale event style auction that will generate premium returns from a nationwide buyer market.

Our Qld office has reported that much of their quality stock is being sold into NSW and Victoria continuing a trend from the past 2 years where both of these states have been the most active buyers for both  truck and earthmoving assets. The tipper truck and dog market continues to be strong. Both NSW and Qld have reported strong results with some record setting prices achieved in Dalby with a 2013 Kenworth T409 Tipper and Hamelex Quad Dog Trailer selling for $290,000, a 2013 Kenworth T408 SAR 6×4 Prime Mover and Hamelex Quad Dog Trailer selling for $305,000 and a 2013 Kenworth T409 Tipper and Hamelex Quad Dog Trailer selling for $310,000.

One major high-quality tipping trailer manufacturer confirmed that they currently have over 100 new dog tipper trailers on order presently, with a waiting time of at least 6 months from the time of order delivery. This manufacturer claimed that this is the best he has seen the business environment for his company based on the amount of orders they were placing to build new tipping trailers. Our Melbourne office confirmed these conditions citing an increase in rail infrastructure and civils works in Victoria pushing out lead times in Victoria. Longer lead times will be pushing prices up nationally ensuring prices for these asset types will remain strong over the remainder of the year.

Victoria generally has seen very strong demand for heavy duty trucks. In February our Melbourne office presented a large selection of late model prime movers, rigid tautliners and skel trailers. Enquiries for the well spec’d low kilometre trucks and trailers in the lead up to the auction was very strong and ultimately reflected in the sales results. A 2016 Kenworth T409 6×4 prime mover with 229,405kms sold for $220,000 (approx. 93% of retail) and a 2015 Isuzu FVL 1400 Tautliner with 168,217kms achieved $133,000 (approx. 100% of retail).

When discussing the current market with end users it is becoming more evident that buyers are completing their due diligence when purchasing consignments with a greater willingness to secure commercial assets and put them straight into work.

In WA there continues to be a lower number of prime movers available on the used truck market in the previous quarter.  Heavy weight trucks including tri-drives are continuing their strong demand and, on the back of a lower supply, have seen a slight improvement in prices for good quality, low km and/or well maintained examples. Kenworth continues to be the most popular.

Medium Duty Road Transport Assets

Good quality small to medium sized commercial Japanese trucks continue to be in strong demand across the country. All offices have reported strong results in this market segment. February 2018 saw an ex-council 2008 Hino FD 500 Truck fitted with a Spoutvac Vacuum body that is used to suck out and clean pipes, pits and sewers. Competition was strong for this specialised asset which sold for 82% of retail value.

 

 

 

AssetsKms/HoursPrice
Achieved
% of
retail
State
2013 Kenworth T409374,970$201,300122%QLD
2015 Isuzu FVL 1400 6x2 Tautliner168,217$133,000100%VIC
2014 CAT CT630 Prime Mover32,922$165,000100%WA
2014 Volvo FH370,548$182,50098%QLD
2016 Kenworth T409 6x4 Prime Mover229,405$220,00093%VIC
2014 Freightliner Argosy 6x4 Prime Mover278,763$125,00093%VIC
2012 Kenworth T409 6x4 Prime Mover879,543$120,00092%VIC
2012 Kenworth T659983,068$110,0091%QLD
2013 Daewoo BH117H270,396$125,00090%QLD

Trailers

Key Point Summary
  • The trailer market has been incredibly strong over the last quarter driven by delivery times on new assets blowing out and massive demand;

The upswing trend in demand and prices for trailers has continued through the last quarter across the board for good quality, late model commercial trailers.  This trend has primarily been driven by the large-scale infrastructure work that is underway and the steady recovery in the mining sector coupled with lead times for new trailers extending out to as much a 7 months for some manufacturers.

Industry feedback from heavy haulage operators in NSW is that they do not want to be caught unprepared to service demand from improving market conditions so they are paying a premium on asset prices. In one example this has translated to an increase in offers of as much as 30% on six months ago for the exact same asset. Western Australia has also experienced similar strong market conditions with a good quality tri-axle flat top trailer that was previously making approximately $25,000 at auction is now making up to $40,000.

There has been a noticeable increase in demand for step-deck trailers with ramps.

Our Newcastle office has noticed a steep increase in enquiries from prospective buyers specifically for step deck trailers than would normally be expected. These are always desired assets, but demand has substantially increased over the last quarter.

The strong market conditions are highlighted by two sales from Slattery Auctions in the last quarter including a 2007 Drake Quad Axle Low Loader making 96% of retail value in QLD and a Tidd 4×4 Float making 120% of retail value in Western Australia.

AssetsKms/HoursPrice
Achieved
% of
retail
State
2011 Krueger ST-3-38 Rear B Double Drop Deck Trailer$47,000100%VIC
2011 Krueger ST-3-38 Drop Deck Tautliner Trailer$49,000100%VIC
2013 Maxitrans ST3 Tri Axle 40Ft Skel Trailer$27,00096%VIC
2007 Drake Quad Axle Low Loder$145,00096%QLD
2008 Azmeb Side Tipper$55,00091%QLD
2017 Tefco TOA 36 Ft Tri Axle Tipper Trailer$80,00090%VIC

Mining & Earthmoving

Key Point Summary
  • Sales of new construction and mining equipment has been very strong globally as a result of increased demand.
  • Miners globally are increasing their capital expenditure as they catch up on reduced levels from previous years.
  • Australia was noted as a key area for sales growth in rail services.
  • Slattery has achieved some of the highest prices for used equipment in the last quarter across the entire auction industry.
  • Current market conditions and results for used equipment is the highest we have seen for the last 3 years.
  • We anticipate prices will continue to grow as demand increases from massive infrastructure projects nationally and supply fails to keep pace.

New Equipment Sales

The return to positive ground in the mining cycle has flowed through to the mining and earthmoving sector with previously reported gains in asset values continuing into the 1st quarter of the 2018 calendar year. These gains are a result of mining and large civil construction equipment being in high demand globally.

Caterpillar Inc. have announced record profits in the 1st quarter of 2018 with sales and revenues of $12.9 billion, compared with $9.8 billion in the 1st quarter of 2017. The Asia Pacific region saw an increase in sales of 46% and 37% for construction industries and resource industries respectively from 2017.

The results are due to strong global economic conditions and favourable commodity price levels that are driving  miners to increase capital expenditures in 2018 for both equipment replacement cycles and expansion. We have previously reported on miners delaying new asset purchases and pushing out the life of existing equipment as well as delaying scheduled maintenance to reduce expenditure, which has heavily impacted on used asset values.

Growth in sales in the Energy and Transportation segment in Australia was 

called out in the Caterpillar Inc financial results as a particularly strong performance in rail services. Sales in Asia Pacific in this segment increased 48% with total sales of $679m for the quarter exceeding total construction sales.

An infrastructure driven price boom for used assets. The previously reported upswing in demand for quality used assets in the mining and earthmoving sector has continued with Slattery seeing some of the strongest prices for used assets in the past 3 years. The auction of a large number of mid-size civil construction assets in Dalby, South East Queensland in March saw Slattery achieve some of the highest auction results of the past 12 months across the entire auction industry.

 

Large government infrastructure projects in NSW has been the key driver of higher equipment prices around the country in recent years however new projects coming online in Qld, Victoria and WA is likely to push up demand for used equipment to new levels.

Research from macromonitor shows the current infrastructure spend nationally at $13 billion and projects total infrastructure spend to hit $16 billion in 2019 and continue for 2 years, see graph below. Massive infrastructure projects will require a huge amount of equipment and road transport assets, which will likely see lead times on new equipment blow out resulting in used equipment prices soaring as the immediacy of equipment availability attracts a premium.

 

 

Used Equipment Sales

Reports out of our WA office have indicated that owners of mining and civil assets have become increasingly reluctant to sell down their surplus equipment as they watch values increase. Rental equipment companies have also reported that their fleets are quickly approaching 100% utilisation rates, which will likely send those companies on the acquisition trail to increase the size of their fleets.

WA is also noticing an increased demand for drilling equipment and in particular newer more technologically advanced equipment, an asset class that saw asset values obliterated only 3 years ago. Asset values for both newer and older equipment has dramatically improved.

Excavators and front end wheel loaders continue to be strong, and the dozer market is hot for medium to large sized dozers with low hours. The challenge has been the supply with low numbers readily available on the market.

The strong prices in these areas were evidenced by some of the highlights from our recent sale in Dalby, which saw the sale of a 2007 Komatsu WA250PZ-5 Wheel Loader with 8118 hours that sold for $76,000 representing 116% of the approximate retail value. At the same auction a 2006 Caterpillar 345C Tracked excavator with 10,812 hours sold for $109,000 representing approximately 120% of the retail figure a longside a Cat 637G Twin Powered Scraper with 10,852 hours, which sold for an incredible $700,000.Whilst there has been an oversupply of dump trucks for the last

two years,demand for these assets have also increased seeing a good recovery in asset prices. The Slattery WA office offered a 2007 Cat 740 Dump truck with 10,452 hours for sale, which sold for $157,500 representing 92% of retail. Backing up this result was the Slattery NSW office who offered a 2003 Terex TA25 6WD Dump truck in January that sold for 100% of the retail value to an online buyer. Given that Terex is considered a second-tier brand for dump trucks, and the item had some mechanical issues, this was a great, albeit surprising, result for the vendor. Both results highlighting the increased demand and recovery in asset values for this type of asset.

 

 

The first quarter of 2018 saw a 2011 Bobcat TL360X Telehandler offered for auction, which hit it out of the park by pulling 100% of retail value. This type of asset is generally always in demand however the strength of this result was a surprise to all, including the impressed vendor,  a private small sized agricultural business.

Ego and the live auction experience seemed to take over the two final bidders, as they continued to try and out do each other.

Whilst all the news is positive for asset values at present, it is important to note that demand for used equipment drops off quickly for poorer quality assets. Some other highlights of the quarter are noted below.

 

AssetsKms/HoursPrice
Achieved
% of
retail
State
2007 Komatsu WA250PZ-5 Wheel Loader8,118$76,000116%QLD
2006 Caterpillar 345C Tracked Excavator10,812$109,000120%QLD
2008 Volvo A40E Water Tanker$80,000100%QLD
1994 Sakai Multi Tyre Roller22,105$17,000100%NSW
2003 Terex TA25 6WD Dumper12,681$27,500100%NSW
2009 Caterpillar 637G Twin Powered Scraper10,852$700,00093%QLD
2007 CAT 740 Dump Truck10,452$157,50092%WA
2015 Kobelco SK28SR-6 Cylindar Hydraulic Excavator289$35,50089%VIC
2016 Kubota U55-4 Excavator1,908$52,00087%VIC
Circa 1999 Mitsubishi MG330-E Articulated Grader5,675$57,00085%NSW
2014 Hyundai Robex Excavator3,955$99,00082%WA

Motor Vehicles

Key Point Summary
  • The 1st quarter of 2018 hit a new record new vehicles sales
  • Strong dealer demand as they are looking to replenish stock.
  • The used car market has changed dramatically over the past 5 years.
  • Car dealers are being very selective in their purchases

New Car Sales

Australia’s new vehicle sales in quarter one 2018 hit a record highs of 291,538, up 1.5 per cent over last year’s record, according to company-provided figures collated by industry peak body, the Federal Chamber of Automotive Industries (FCAI).

The push for ceaseless growth within Australia’s intensely crowded and fragmented market continues unabated. Consider this: nine of the past 11 months have produced all-time record tallies.

Five states and territories recorded gains during the last quarter for new car sales. The Northern Territory led the way with 12.8 per cent growth, followed by the ACT with 7.9 per cent, then Victoria (6.3), Queensland (1.8), and Western Australia (1.3). South Australia, Tasmania and NSW all recorded falls.

SUVs dominated the market, recording a 42.6 per cent share compared to 33.8 per cent share for other passenger vehicles, and 20.5 per cent for light commercials — two of which, the Toyota Hilux and Ford Ranger, were once again the nation’s two most popular vehicles of any type.

Used Car Sales

The used car market has changed dramatically over the past 5 years. Change has come in many forms. From buyers tastes shifting away from family sedan and the Holden Commodore to small hatchbacks like the i30 or towards the SUV/lifestyle vehicles in the Jeep or Hilux. Second hand car dealerships have evolved away from the auto alley outdoor car yards to the now popular large warehouse box sales rooms. Informed with more information than ever before, buyers have done their research and have usually picked their car out before walking into a dealership. The marketing battleground is all digital and the days of haggling and negotiating have shifted to a fixed price no negotiation model.

All of the above changes have had knock on effects throughout the secondary market. In the auction space we see car dealers being more selective in their purchases and less likely to take a risk on less popular makes and models without knowing they can shift it quickly. The positive outcome however is that for quality vehicles with a known make and model, dealers are competing with end users and paying more than they have before happy to take a smaller margin on a vehicle in favour of lower inventory risk.

The above presents both better or lower results for our vendors depending on what market segment their vehicle fits into. Our Brisbane office had a very strong start to the year with strong dealer participation looking to replenish their inventory levels. Competition has been very fierce on quality vehicles as there appears to be a lower supply available in Qld.

Toyota stock remains the easiest of all vehicles makes to sell with buyers also willing to

pay decent amounts for high kilometre stock. Demand within the Utility market remains strong nationally, dual cab automatic 4×4 diesel vehicles are a sought after in most auctions around the country. Rangers and Hilux’s continue to perform with many achieving retail prices.  Recent auctions have seen buyer’s turning to the Nissan Navara and Isuzu D Max in efforts to meet demand in this area of the market.

European brands still continue to underperform in the market place.  

Historically higher servicing costs will see buyers avoid these vehicles without a price discount.  The Holden Cruze is a vehicle that is proving hard to value, retail guides suggest there is a stronger market than we are witnessing at auctions. Buyers have been avoiding the Holden Commodore 6 cylinder VE vehicles with high kilometres and little service histories due to the unreliability of the timing chain and subsequent high repair costs. This has made it difficult to estimate values.

In WA, our office has reported that older vehicles, beyond 10 years of age, are continuing to slide from a price perspective. For these vehicles, maintaining the vehicle’s registration is vital to ensuring its saleability. Older unregistered vehicles approach a price near parts/scrap value.

Takata Airbag safety recall

The Takata Airbag safety recall has affected quite a number of client inventories pushing out days in stock for affected vehicles as our various sites around the country engage with dealerships to replace faulty airbags.

This issue does not appear however to have hurt sales results for affected vehicles as the market appears to have accepted the issue as something to be dealt with.

AssetsKms/HoursPrice
Achieved
% of
retail
State
2013 Mercedes Benz A45 AMG40,182$43,500100%VIC
2015 Isuzu D-Max LS-M Hi-Ride (4x4)22,200$35,750100%VIC
2011 HSV Clubsport R8125,109$2700098%VIC
2016 Holden Corolado LS-X (4x4)52,966$29,50095%VIC
2014 Holden Commodore SS-V Redline54,379$31,50095%VIC
2014 Toyota Landcruiser VX (4x4)45,502$65,00092%QLD
2014 Land Rover Discovery75,360$68,00091%QLD
2015 Mitsubishi Triton D/Cab55,680$22,00088%NSW

Aviation

The overall aviation sector continued to grow over the last quarter with the sales of single engine helicopters and fixed wing aircraft showing the greatest activity.

Single engine helicopters, both naturally aspirated and turbine prove to be in demand in the agricultural and tourism sector, with delays in new aircraft increasing the price on the secondary market.  Single engine fixed wing aircraft have shown strong demand nationally with low timed, and upgraded avionics providing attractive selling points.

Twin engine naturally aspirated fixed wing aircraft have continued to be subdued, with the cost of fuel, and increased running costs having a detrimental effect on the secondary market. The market for single turbine engine fixed wing aircraft have continued to see good interest and are an attractive option to twin engine fixed wing aircraft.