According to the James Bond film franchise, you only live twice. Yet in just over a century, 007’s favorite automaker Aston Martin has lived almost as many lives as a cat.
The venerable British brand appears to have reached a milestone with its seven bankruptcies, following the appointment of Managing Director Andy Palmer in 2014. In its 105th year in business, Aston Martin will be listed on the London Stock Exchange as part of the one of the most anticipated IPOs. (IPO) of recent times.
On Thursday (September 20, 2018), the automaker announced plans to seek a valuation of up to £ 5.07 billion, with a price range of £ 17.50 to 22.50 per share out of the 25 % of the capital that will be up for grabs on October 8. . Hitting a price towards the higher end of the range could secure a place for the company in the FTSE 100.
Many oil companies and bond fanatics will be tempted to buy. But they would do well to be cautious – compare Aston Martin’s vaunted valuation to some of its contemporaries and the company looks a bit wealthy.
Take the example of Ferrari, which is listed on the New York Stock Exchange at around $ 130 per share. The Italian stallion is trading at around 20 times next year’s operating profits and produces more than 8,000 cars a year with an average selling price of around $ 300,000. Last year it posted a net profit of around 537 million euros on a turnover of 3.4 billion euros.
Compare that with Aston Martin, which, in the middle of the price bracket, would only trade at a small reduction in value to Ferrari, while producing around 5,000 units per year at an average selling price of approximately $ 200,000. In 2017, the company said production and sales reached a nine-year high – sales increased 58%, with revenues exceeding £ 840million and pre-tax profits of over £ 180million. pound sterling.
By these measures, it would appear that it would be worth paying more per share for Ferrari in the immediate future.
However, hopes will rest on Aston Martin’s future growth prospects. The company plans to ramp up production by opening a second factory in St Athan, Glamorgan, with the first cars slated to roll off the production line in the next two years. In recent years, it has also benefited from strong demand abroad, particularly in Asia, and the company plans to open 10 new and renovated showrooms in China alone.
Aston Martin’s transition to electric vehicles, with the Valkyrie hybrid model, provides further grounds for positivity. Even with a product priced at £ 2.4million, the car sold, underscoring strong demand for its vehicles. The company is committed to becoming “100% hybrid” by the mid-2020s.
Nonetheless, a curious aspect of this IPO is its timing. As it comes after a very good year for Aston Martin, numerous economic indicators suggest that the global economy is reaching the final stages of its current cycle. Some commentators are pointing to a slowdown in 2020 and even now emerging markets are struggling.
A more cynical observer might also point the finger at the Kuwaiti investors of Aston Martin, who bought the company from Ford in 2007 and could make about ten times their initial investment.
And, although being an extreme example, the financial crisis of a decade ago shows that sales of luxury goods, which rely on a high degree of discretionary spending, are particularly hard hit. Aston Martin, for its part, saw the number of its vehicles sold drop significantly from 7,300 in 2007. Go ten years ahead and the number of units sold has not exceeded this peak.
Aston Martin seems to be heading in the right direction, but there are always risks. Increasing production can be a double-edged sword for a name with such cachet: more cars on the road could dilute the brand’s value. Despite this, he has carved out a strong position in the attractive market for high net worth clients and some investors will no doubt be eager to spy on the opportunity to own part of an iconic UK brand.
Richard Umpleby is an investment manager at Brewin’s dolphin