Marshall Motor Holdings — Update 17 March 2016

Marshall Motor Holdings (LN: MMH)

Last close As at 28/03/2024

394.00

0.00 (0.00%)

Market capitalisation

308m

More on this equity

Research: Industrials

Marshall Motor Holdings — Update 17 March 2016

Marshall Motor Holdings

Analyst avatar placeholder

Written by

Industrials

Marshall Motor Holdings

A positive debut

Automotive

QuickView

18 March 2016

Price

168.5p

Market cap

£130m

Share price graph

Share details

Code

MMH

Listing

AIM

Shares in issue

77.2m

Business description

Marshall Motor is the tenth largest UK motor retailer operating 76 franchises spread across 24 brands. It is the only dealership group which represents each of the top five volume and premium brands. The group has a strong geographical presence in eastern England.

Bull

Consistent recent trading record

Strong balance sheet with £24m net cash (31 December 2015)

Opportunities stemming from a fragmented market

Bear

Market caution based upon record new vehicle registrations in 2015

Further weakness of sterling may undermine OEM marketing support

Margin pressures related to improved product availability

Analysts

Nigel Harrison

+44 (0)20 3077 5700

Roger Johnston

+44 (0)20 3077 5722

Marshall Motor (MMH) has emerged from its first year as a quoted company with its strong trading record sustained, its growth strategy established and a strong financial position to support management ambitions. We believe that the share price should respond over the medium term, as the market begins to recognise the potential.

Sound growth

Marshall Motor delivered a strong set of figures in its first year as a quoted public company. Revenues increased 13.5% to £1.23bn, with adjusted PBT up 21% from £13.1m to £15.8m. New car unit sales were up 9.9% (7.2% like-for-like), used car sales by 8.2% (1.5%) and aftersales revenues rose 8.5% (2.4%). More significant was a 17 basis point rise in gross margins to 11.8%, in a year when increased vehicle availability led to considerable pressure on margins. Group operating margins widened by 10 basis points to 1.5%, despite the ongoing extra overhead costs associated with the group’s public company status.

Positive medium term outlook

Market conditions remain benign. Management has indicated a good start to the year and, with the added benefit of a full year contribution from last year’s £24m acquisition of SG Smith, the group is looking for materially higher profits in 2016. Vehicle registrations are likely to continue to rise modestly, while industry dynamics continue to favour the larger groups. Investment in downstream used car and aftermarket operations remains the key to organic growth, while there are ample funds available to finance acquisitions. Stripping out the debt directly related to the leasing fleet, the group has net cash of £24m, which can be supplemented from a £75m RCF and a £25m accordion facility. Over the seven years since the appointment of the CEO, UK new vehicle registrations have risen from 2.0m to 2.6m cars while used car volumes have been largely static; over the same period Marshall unit sales have risen by more than 150% from 24,728 to 62,802. The group has the strategy and ambition to build significantly on this progress.

Valuation: Potential not recognised

UK motor retailer shares trade in a close range between 9.3x and 10.2x CY16e earnings and at a c 35% discount to the FTSE General Retail Index. We believe the sector discount fails to recognise the defensive qualities inherent in motor retailing, while the medium-term potential is not recognised in the rating of Marshall shares.

Consensus estimates

Year
end

Revenue
(£m)

PBT
(£m)

EPS
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/14

1,085.9

13.1

N/A

N/A

N/A

N/A

12/15

1,232.8

15.8

15.2*

2.98

11.1

1.8

12/16e

1,420.0

18.6

18.2

4.10

9.3

2.4

12/17e

1,465.0

19.3

19.3

4.30

8.7

2.6

Source: Marshall Motor Holdings; Bloomberg. Note:* 2015 EPS based on year-end capital.

Disclaimer

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison's solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are "wholesale clients" for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document.
A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a "personalised service" and, to the extent that it contains any financial advice, is intended only as a "class service" provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited ("FTSE") (c) FTSE [2016]. "FTSE(r)" is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE's express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

More on Marshall Motor Holdings

View All

Latest from the Industrials sector

View All Industrials content

Industrials

ACWA Power — Record results for FY23

Industrials

Dowlais Group — Motoring forward

Smiths Group — Update 16 March 2016

Smiths Group

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free