Interactive Investor

Insider: a buyer at Aston Martin plus a share going cheap

After resuming its downward path last summer, one boss has seen enough and has picked up stock in the luxury car manufacturer. Has he got a bargain or an old banger?

8th May 2024 09:48

by Graeme Evans from interactive investor

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An Aston Martin car outside the company HQ and production plant in Gaydon, England

Support for Aston Martin Lagonda Global Holdings Ordinary Shares (LSE:AML) shares following their mid-week reverse to a 16-month low included a £50,000 purchase by one of its board members.

Senior independent director Nigel Boardman made his latest investment at a price of 135.8p, a day after City disappointment over first-quarter sales figures led to a 6% slide.

The FTSE 250-stock finished last week at 139.5p, having jumped 10% at one point on Friday as investors reflected on the company’s second-half growth potential as it prepares to introduce four new models before the end of the year.

Executive chair Lawrence Stroll said on Wednesday the quarter had been a transitional one, with the end of production and delivery of outgoing core models and the ramp up in production of the new Vantage, upgraded DBX707 and upcoming V12 flagship sports car.

An ongoing programme of ultra-exclusive models will also see Aston Martin deliver a new “Special” in the fourth quarter of the year.

Other developments highlighted by Stroll included the completion of a £1.15 billion refinancing on new five-year terms. Existing lenders also showed their support through a 70% increase in the new revolving credit facility to £170 million.

Stroll also stuck by a long-running target for around £2 billion revenue and £500 million of adjusted earnings by 2024-25. For the first quarter of this year, revenues fell 10% to £267.7 million on wholesale volumes 26% lower at 945.

Deutsche Bank said the volume decline had been steeper than expected, while also noting a sequential fall in the average selling price before the benefit of new launches.

The bank, which has a “Hold” recommendation and 200p target price, added: “Overall, the shape of the earnings and cash generation in 2024 did not change much but has become somewhat more fourth-quarter weighted.

“In our view, Aston Martin needs to deliver on the roll-out execution, price points of the portfolio and subsequent cash break-even in the second half. On all three, any proof of meeting the plan will only be visible towards late 2024.”

The shares had recovered to 400p last summer, having been as low as 90p at the end of 2022 after the company revealed delivery delays caused by a shortage of interior parts.

A director of FTSE 250-listed Pantheon International Ord (LSE:PIN) has bought £100,000 of shares, backing the private equity investment trust to close a 33% discount to its net asset value (NAV).

The purchase by non-executive board member Rahul Welde, who held senior marketing and digital roles during 30 years at Unilever, took place on Thursday at 327.6p.

While that’s still a big gap to the March NAV of 488.1p, the price represents an improvement on the 41% discount seen in May 2023 when rising deal financing costs and uncertain market conditions engulfed the sector.

Pantheon is one of the longest-established private equity funds listed on the London market, outperforming the FTSE All-Share and MSCI World indices over multiple periods since 1987.

Offering access to sectors and companies not usually available via public markets, it has achieved annualised net asset value growth (NAV) of 11.9% in that time.

The £2.3 billion portfolio is headed by the Dutch discount retailer Action, which accounts for 1.2% of the total ahead of US-based investments in IT security firm Kaseya, Smile Doctors orthodontists and healthcare technology business ShiftKey.

Most of the fund is invested in buyouts, which tend to be mature, well-established businesses. Profitable technology and healthcare companies make up a big slice of exposure.

Part of the reason for the recent narrowing of the NAV discount has been a £200 million buyback programme, which between August and February took place at an average 303.7p.

Chair John Singer also credited a healthy mix of consistency in performance and Pantheon’s risk positioning for all macroeconomic climates.

His longer-term ambitions for closing the gap include working with peers in the sector to help educate and to “dispel some of the myths” surrounding private equity.

He said: “Cyclical pressures, which created 40–50% discounts to NAV in the market, will reverse, helping to reduce those discounts. But to achieve the discount (or premium) levels the sector deserves and dreams of requires a re-rating to stimulate new demand.

“That in turn requires work by private equity general partners and investment trusts together to provide clear and simple explanations of what we do and how we do it to the other two players in our chain – namely wealth managers and investors in general.”

Ahead of Welde’s investment, directors held 3.7 million of shares worth £11.9 million at the time of February’s half-year report. Shares closed last week at 329.5p, having rallied more than 12% in the past six months.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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