H1 results from Auto Trader this morning has shown a performance in line with expectations at the half year. Net debt has been reduced and the company has continued its’ rolling share buyback programme. Our view on the stock has not changed, and we continue to view BCA Marketplace as a better alternative to play the sector with genuine structural growth opportunities on a pan European basis.
Companies: Auto Trader Group PLC
The SMMT (Society of Motor Manufacturers and Traders) has released data this morning confirming new car registrations in June of 243,454 which is -4.8% YOY, implying a H1 of 1,401,811 units which is -1.3% YOY but represents the second highest H1 on record. Private registrations were -7.8%, with fleet also showing a decline at -2.4% YOY representing 57.1% of registrations vs. 55.6% last year. We continue to believe the earnings risk has been accounted for in heavily discounted valuation multiples based on cautious and below consensus forecast assumptions across our coverage universe. We continue to favor stocks with flexible balance sheets at this stage of the cycle, and believe stocks such as Vertu and Cambria remain significantly underpinned by their growing property portfolios and proven operating models.
Companies: CAMB VTU PDG INCH LOOK MMH MOTR BCA AUTO
Auto Trader has announced results for the 12 months to 31 March 2017 this morning, with performance slightly ahead of market expectations. Growth continues to be price driven, with average revenue per retailer forecourt (ARPR) ahead of expectations, +11.7% YoY, whilst the number of forecourts advertising on Auto Trader has declined 1.6% over the past 12 months. We continue to believe that on a PER of 25.3x the shares look expensive and we see BCA Marketplace on an FY18 PER of 19.2x as our preferred play on the sector with real structural growth opportunities and the benefit of pan European scale.
What makes a perfect platform? Size, value, bargaining power, and economic moat
The SMMT (Society of Motor Manufacturers and Traders) has released data this morning confirming a record new car market of 2.69m registrations and +2.3% YOY. This is the fifth year in a row of growing new car registrations. Headline December registrations were -1.1% with private registrations -5.5% completing a third quarter in succession of negative growth in this segment. Fleet continues to drive the growth in this market and was +4.8% YOY representing 51.3% of registrations vs. 50.0% last year. The key question is what will happen in 2017 post Brexit with uncertainty levels still high. We maintain our cautious stance and downgraded our EPS forecasts by 8-15% across the sector in November accordingly. That said, we believe the earnings risk has been accounted for in trough valuation multiples based on cautious forecast assumptions (we assume a 10% drop in new car registrations vs. the SMMT at -5%). We continue to favor stocks with flexible balance sheets at this stage of the cycle, and believe stocks such as Vertu and Cambria remain significantly underpinned by their growing property portfolios.
Companies: CAMB VTU PDG INCH LOOK MMH BCA AUTO
H1 results from Auto Trader this morning has shown a performance in line with our expectations at the half year. Net debt has been reduced and the company has continued its’ rolling share buyback programme. Our view on the stock has not changed, and we continue to view BCA Marketplace as a better alternative to play the sector with genuine structural growth opportunities on a pan European basis.
Final results from Auto Trader contain few surprises and were marginally ahead of our forecasts on most measures. Cash conversion was better, net debt was lower, which will result in a rolling share buyback programme as anticipated. Ahead of the analyst meeting, we do not anticipate significant changes to our forecasts. Our view on the stock has not changed, and we continue to view BCA Marketplace as a better alternative to play the sector with genuine structural growth opportunities on a pan European basis.
We believe that the UK motor sector has had a strong Q1 2016, which should position most companies well for H1. Consumers are still responding well to attractive financing deals, and we anticipate a strong H1 performance from dealers as a result. Valuations amongst the dealer groups remain undemanding in our view, and we see scope for further consolidation during the coming year.
Companies: INCH AUTO BCA LOOK MMH PDG VTU CAMB
Auto Trader release an ad hoc trading statement this morning ahead of their full year results due on 9th June. The company report a better than expected performance in driving ARPR (average revenue per retailer) and higher than expected consumer services revenue. Management additionally highlight cost reductions have led to improvements in operating margins, we expect this will lead to a 3% - 4% upgrade in consensus EPS.
We note the acquisition of UK private company Spire Automotive by US listed Group 1 Automotive yesterday for an undisclosed sum. With US motor retailers seemingly struggling for growth and seeing more margin pressure, it will be interesting to see whether we see more transactions of this nature, particularly against a backdrop of a strengthening US dollar. Market conditions in the UK look to remain robust with UK new car sales for January the strongest since 2005, with residual values seemingly still robust. The sector remains good value to us, and looks like the dealers across the pond also see this too.
Companies: INCH AUTO BCA LOOK PDG VTU CAMB
We believe that the UK Motor Sector continues to offer attractive opportunities following a successful 2015 given it’s anticipated above average growth rates, strong cash generation and attractive ROCE generated from largely robust balance sheets. We also expect further consolidation amongst the dealers, as the operating environment continues to favour larger groups in our view.
Companies: AUTO BCA CAMB INCH LOOK MMH PDG VTU
The SMMT (Society of Motor Manufacturers and Traders) has released data for the key trading period of September this morning. The headline number has again come in at record levels, showing growth in private registrations vs. what was a strong prior year comparative. However, we do think there was an element of self-registration that took place here, with the fleet market again driving a significant proportion of the growth. The VW emission issue does represent some uncertainty for dealers as we move into Q4, but this is seasonally quiet anyway and we suspect dealer profitability will be intact for 2015
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Today's news & views, plus announcements from TSCO, AVON, BGO, MERC, BOXE
Companies: Bango plc
Gateley’s H1 update is highly impressive, confirming a year on year improvement in activity levels in September and October and a strong sense of optimism at the beginning of H2. The Platforms continue to drive new business, whilst operating margins have benefited from cost actions taken in response to the pandemic (H1 PBT will show growth year on year). In light of the confident tenor of the statement, we reintroduce headline forecasts this morning, assuming stable revenue this year - which would be a considerable achievement - with profits returning to pre-pandemic levels by FY23.
Companies: Gateley (Holdings) Plc
In an encouraging H1 update, Gateley has detailed that the Group’s activity levels and revenue generation continue to follow an improving trend with monthly activity during September and October being in excess of prior year. Sales in H1 2021E are expected to be not less than £50.0m (-3.5% on H1 2020) but adj. PBT is expected to be not less than £7.0m, up from £6.6m as cost-reduction initiatives benefited. Net cash was £9.6m at October 2020. We have reinstated forecasts, assuming H2 sees some increase in costs as salaries normalise and a bonus is accrued before more normal growth rates resume. Similarly, we assume dividends resume with a final in FY 2021E. We reiterate our view that Gateley’s proven model provides good growth prospects, supported by the addition of high-quality staff and acquisitions, strengthening the range of services offered.
In its trading update, management confirmed that adjusted FY20e PBT is expected to be c €52m, a 27% increase y-o-y and 12.7% ahead of our prior estimate, with revenues of €367m, 0.5% ahead of our prior estimate. FY20e margins of 14.2% vs 12.5% in FY19 are driven by improved operational leverage and tight cost control, together with COVID-19 related cost reduction (eg marketing, travel). Having pared back our forecasts at the start of the COVID-19 pandemic, we now upgrade our FY20 estimates for a second time to reflect the significantly stronger margins in H220e, raising our FY21 estimates and introducing our FY22 estimates. We have also incorporated the US$32m acquisition of the LA-based marketing services business, gnet. With substantial financial resources following its £100m placing in May, management remains focused on its M&A agenda.
Companies: Keywords Studios plc
Boku has released a trading update confirming that EBITDA is likely to be ahead of consensus expectations for FY20. As most of the upside is due to COVID-19-related cost savings, we have upgraded our FY20 EBITDA and EPS forecasts by 10% and 15%, respectively. We leave our FY21/22 forecasts unchanged, pending a more detailed trading update in January that will cover the busy December holiday season.
Companies: BOKU, Inc.
Pressure Technologies has announced that it has raised £7.5m through a Placing, via an accelerated bookbuild, and PrimaryBid offer at 60p/share, a 4% discount to the closing midmarket price on 27th November 2020. The net proceeds of the fundraise will be used to accelerate growth in the fast developing hydrogen market, build the group’s capability in Integrity Management and to strengthen the balance sheet. As Nomad and Broker to the fundraise we are restricted and can therefore provide factual comment only. The Placing and PrimaryBid offer are subject to shareholder approval at a General Meeting to be held on 17th December 2020.
Companies: Pressure Technologies plc
President Trump likes to project himself as a highly successful businessman, but surprisingly little is known about his true financial position. Various articles, including a 2016 in-depth analysis by The Wall Street Journal, have speculated about his income and asset base. All sorts of claims and counter-claims have been made about his wealth – by Trump himself, pitching his fortune at some $9bn, and by journalist Timothy O'Brien, suggesting that it is as “low” as $150m-$250m. It is doubtful whether we shall ever know the truth, but we can use Trump’s UK corporate filings to gain an insight into his businesses in Scotland.
Companies: AVO ARBB ARIX CLIG DNL FLTA ICGT PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
FY2020E has been a challenging year on a number of fronts and a significant loss is expected on revenues down 12% at c.£25m and also impairment charges of c.£14m. Nevertheless, the Group enters FY2021E in better underlying shape, with benefits to follow from reorganisation and restructuring, and investment in sales, engineering capability and systems. This provides a platform to capture growth, albeit that no recovery is expected in the next 12 months in the oil & gas market, now c.35% of FY2021E revenue. Efforts to diversify both its customer base and end markets have been successful, with growing opportunity in the defence, industrial and hydrogen sectors in particular. Our forecasts anticipate profitable growth in both FY2021E and FY2022E, leaving the shares on forward PERs of 21.8x and 12.1x for FY2021E and FY2022E respectively.
Keystone Law has announced a trading update indicating that the Group has performed well through the second half of the year and that like-for-like performance has returned to near pre-COVID levels. This results in the Group expecting to see results “comfortably ahead of current market expectations” for FY21 which we see as a strong message and reiterate our buy rating.
Companies: Keystone Law Group Plc
Appreciate is the UK's leading voucher, gift card, and e-code provider, working with brands from Iceland to Halfords to Boots. It sells its pre-paid products to corporates as well as directly to consumers. It also runs the UK's largest Christmas Savings scheme, having helped some 2.7m families put money aside for Christmas expenses over the years.
In Appreciate, we see a business that's undergone significant change and modernisation since 2018. Under its highly competent and dynamic management team it has transformed from a Christmas savings business that physically produced hampers, to a pure play financial services business with material growth prospects in the longer term.
Companies: Appreciate Group plc
Oxford University and AstraZeneca announced the first interim analysis from the Phase III study of its COVID-19 vaccine candidate, which was found to be 70% effective in preventing COVID-19. This follows similar announcements from Moderna, and Pfizer/BioNTech in the previous two weeks, and the caveats we mentioned at the time remain the same. While all of these results have been highly encouraging, we reiterate that they do not diminish the urgent need for COVID-19 treatments and testing, which will be required for years to come. We consider Synairgen, Avacta, genedrive, Omega Diagnostics and Open Orphan to offer good buying opportunities.
Companies: AVCT ODX SNG GDR ORPH
Braemar’s associate AqualisBraemar (AQUA-OSL) announced an acquisition and equity raise yesterday that was very well received by investors. The AQUA share price finished the day up +25%, meaning Braemar’s stake (which is on the balance sheet at £7m) is now worth £13.4m. This provides increased support to Braemar’s valuation and a significant potential source of funds if the stake were to be realised in the future. In the meantime, it provides a useful and increasing source of dividend income (prior to yesterday’s deal, we had forecast £0.6m dividend income p.a.) and we continue to highlight the strategic progress the new management team at Braemar is making and the very significant valuation gap to closest peer Clarkson (December 2021 P/E 22x).
Companies: Braemar Shipping Services plc
Rhino’s second series of 5-year bonds offers exposure to a private company with an enticing set of characteristics, combining significant growth potential with proven ability to deliver over a 40-year history. Having spent several years shifting its business model away from capital-intensive production towards closely controlled licensing, and then investing heavily in increasing exposure at the top level of international rugby, Rhino is in a position to generate significant free cashflow to service this 5.5% coupon and offer attractive growth potential, further strengthening debt serviceability ratios.
Companies: Rhino Rugby Bonds Plc
RBG Holdings has updated on significant transactions completed in the Group’s Convex and LionFish divisions since its last market update in mid-September. With the Group’s legal division – RBL – continuing to trade well, management now have considerably improved visibility on financial performance, and so reinstate guidance with an expected FY20E revenue range of £24m-£26m (FY19A: £23.7m). For FY21E we anticipate revenue in the range of £26m-£29m We take this opportunity to reinstate our forecasts for both FY20E and FY21E; revenues of £24.6m / £26.9m, adj EBITDA £6.8m / £8.9m, adj EPS 5.0p / 6.8p respectively. Our forecasts are cautiously positioned towards the bottom end of guidance, with scope for upgrades when discretionary litigation asset sales or Convex transactions complete. On our FY21E forecast of 6.8p adj EPS, a mid-teens multiple of 15x PER implies the shares could be worth 100p.
Companies: RBG Holdings Plc
WEY has delivered an impressive set of results this morning, significantly ahead YoY, meaningfully outpacing our expectations on the revenue, profit and EPS lines. With strong revenue growth of 38% feeding through to 103% EBITDA growth and adj. EPS up 100%, the inherent efficiency of the model, supported by rising student numbers, is manifest. Educating ‘3,000' students, WEY is larger than any UK secondary school. Moreover, while providing a collegiate, online education, WEY is a clear beneficiary both of long-running and fundamental drivers, and of the current Covid-focused environment. With the benefits of past investment effectively displayed in today's results, the company continues to do more to grow its platform, present and future, and has highlighted an ongoing commitment to investing in the business to provide further support for future profit acceleration. Our Fair Value assessment is 34p per share.
Companies: Wey Education PLC