Pendragon (LON:PDG) recently reported that the UK car market is buoyant, and there is more evidence of that today from Vertu Motors (LON:VTU), who announce in their pre-close trading update today that trading performance for the year ended 28 Feb 2013 will be ahead of current market expectations. As with most car dealers, they make their profit (a wafer thin margin) on aftersales. Having had a very quick look at the figures, it doesn't stand out as a particular bargain in my opinion, on about 14 times this year's earnings, and 10.5 times next year's.
As a general comment, I can't see the point in chasing up shares which have already risen a lot, and which now look fully priced.
The overhang from Caledonia Investments selling their large stake in Begbies Traynor (LON:BEG) finally cleared yesterday, so I am told. They disclosed as going below 3% (the last disclosure needed for a seller) on 27 Feb (relating to transaction(s) on 25 Feb), and apparently are out completely now, a market source tells me.
Combined with an in line trading statement yesterday, that should now open the door for BEG shares to re-rate, if buyers have the appetite to chase them higher. The dividend yield appeals at 6%, as does a PER of 6 - it's not often you find a share where the PER is lower than the dividend yield.
I've looked through all the other announcements for this morning, and there's nothing else that falls within my remit I'm afraid. It's mainly large caps reporting today, and resource sector announcements, which I don't cover. So it only remains for me to wish you a good weekend, and sign off for the week.
Regards, Paul.
(of the shares mentioned today, Paul has a long position in BEG, and no short positions)
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Experienced UK small cap investor & independent analyst, Paul Scott (aka. "paulypilot"), casts his eye over results RNSs each morning. His reports are now published exclusively on Stockopedia in stages each morning - with a first comment just before market open at 8 a.m., then additional updates throughout the morning… ...read more or visit website »
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Vertu Motors plc is engaged in the provision of new and used vehicles, together with related after-sales services. The principal activity of the Company is the provision of management services to all subsidiary statutory entities. As of February 29, 2012, the Company had 78 sales outlets from 66 locations.. On March 1, 2011, the Company acquired Widnes Car Centre (1994) Limited. On December 1, 2011, it acquired Compare Click Call Limited. On January 9, 2012, the Company acquired a Vauxhall dealership in Northampton from W Grose Limited. In September 2012, it acquired the trade and assets of three motor retail locations from Co-op Motors. In December 2012, the Company acquired the trade and assets of Springfield Cars Limited's (Springfield) Honda operations.In January 2013, the Company had acquired Dobies (Carlisle) Limited. In January 2013, it acquired the business and certain assets of the Vauxhall outlet in Keighley. more »
Begbies Traynor Group plc provides independent professional advice and solutions to businesses, financial institutions, the accountancy and legal professions and individuals in the areas of insolvency, financial restructuring and risk management. It operates in two segments: insolvency and restructuring and global risk partners. It is an independent business rescue, recovery, restructuring and personal insolvency organization, providing a partner-led service to the businesses. Global risk partners is a service provider of specialist, integrated risk consulting and forensic investigation services. Its services include forensic technology and accountancy; risk and security consultancy, and corporate intelligence and investigations. During the fiscal year ended April 30, 2011, it discontinued its tax and red flag alert segments. In January 2012, it sold its Channel Islands Insolvency and Restructuring business. In April 2012, it sold Red Flag A!ert LLP. more »
1 Comment on this Article show/hide all
Paul, you probably didn't bother looking at VTU's results this morning having dismissed the stock here. I agree that they have already risen a lot but that's not to say there's not more to come IMO. You also say they make their money on wafer thin aftersales margins but todays results paint a different picture. They reported gross margins of 40.8% which although marginally down on last year is the result of taking market share away from independent servicing outfits on older cars where the price is more competitive. This is deliberate as increasing revenues means spreading fixed costs more thinly as well as selling more parts through the workshops.
The car market in UK is quite healthy and VTU are keen to offer a better experience to car owners by being more professional than your average car sales/garage. This seems to be working with many dealerships rated in the top 25% for customer satisfaction.
Today also saw the acquisition of three outlets with Land Rover franchises, which is expected to be earnings enhancing, and a placing which will leave some spare cash for further acquisitions. VTU are keen to move into the premium car segment too and look to me to be executing their buy and build strategy well.
Forecast p/e is about 12 so not cheap but what I'd call reasonable value for patient investors. Asset backing here is very strong with lots of freehold sites. Management are experienced and clear about how they will achieve their goals.
Would appreciate any thoughts you have.