Interactive Investor

Insider: these directors could make a serious profit

21st June 2021 08:22

Graeme Evans from interactive investor

If analysts have got their targets right, management have bought shares in this small-cap at a good price.

The ambitious plans of used car supermarket Motorpoint (LSE:MOTR) to take on online rivals Cazoo and Cinch have been backed with boardroom money after directors bought shares worth £90,000.

The purchases by chief financial officer Chris Morgan and non-executive director Keith Mansfield were made after the FTSE All-Share company published annual results, and outlined its intention to double sales to £2 billion by 2024.

Half of this figure will come from the acceleration of online revenues to £1 billion as the company boosts investment in its technology, data and e-commerce capacity, meaning that more customers will be able to buy cars without any non-digital contact.

Motorpoint faces stiff competition from fast-growing Cinch and Cazoo, with the latter recently valued at £5 billion after listing in New York through a special purpose acquisition company.

Cazoo sold 9,762 vehicles in the quarter to 31 March, sending revenues 481% higher to £113.9 million. Motorpoint's revenues were £721.4 million across last year, a fall from £1 billion prior to the pandemic, as it sold 68,000 vehicles through its 14 showrooms as well as its e-commerce platform.

Online retail sales grew 89% against the previous year, with its new home delivery service representing more than half of this growth.

Chief executive Mark Carpenter said: “We now have an opportunity to grow rapidly as we continue our transformation into an e-commerce led business with huge potential.”

Motorpoint shares rose from 275p to end the week at 313p, but analysts at Liberum have a price target of 435p after raising profit forecasts by 33% for 2022 and 70% the year after.

They said: “Targets are ambitious, but the track record is strong and we have confidence in the management team to deal with the threat from online disruptors.”

House broker Shore Capital points out that the group is the UK's leading nearly new car retailer and has several strategic and structural advantages, including the support of a branch network.

They add: “The fact is that a lot of British customers wish to see, touch and feel a big-ticket item like a motor car. Put another way, the addressable market for Motorpoint is much greater than is the case for the likes of Cazoo and Cinch.”

This approach will be further enhanced by Motorpoint's plans for 12 new smaller branches in order to accelerate its national coverage.

Numis Securities upped its price target from 320p to 400p after raising revenue and profit forecasts by 40% for 2025. The broker said: “Should Motorpoint deliver on the proposed growth and evidence itself as a leading omnichannel player set to play a part in consolidating the fragmented used car market, we see scope for material further upside.”

The boardroom shares were bought at 296p for Morgan's purchase worth £40,000 on Thursday and 303p for Mansfield's £49,300 acquisition on Friday. Morgan joined the company in January from Speedy Hire (LSE:SDY) and Mansfield has served as non-executive director since May 2020.

Strategic update triggers share buying at this AIM firm

Diaceutics (LSE:DXRX), the precision medicine diagnostics firm used by many world leading pharmaceutical companies, has also seen director share buying in the wake of a strategic update.

The AIM-quoted company hosted a virtual capital markets day in which it highlighted strong initial uptake for the DXRX platform, which it launched in October following three years of development and a further £6 million of investment in 2020.

DXRX enables the company's pharma clients and laboratory network to collaborate on the development and commercialisation of precision tests in step with therapy launches. Drugs often demonstrate significant positive clinical results in some patients but not in others, prompting the need for effective testing tailored to individual patient groups.

Precision medicines are commonly used for treatment in oncology as well as other disease areas such as multiple sclerosis and rheumatoid arthritis.

During the strategy update, Diaceutics founder and chief executive Peter Keeling said 14 client projects were live on the DXRX platform by the end of April, with over 40% of the sales pipeline for the second quarter currently represented by DXRX-enabled products.

He said: “We are seeing clear evidence of its value to stakeholders within the pharma industry and to Diaceutics, providing us with the ability to scale our offering in line with the increased growth in the precision medicine industry.”

The day after Wednesday's update, Diaceutics chair Deborah Davis bought £35,000 worth of shares at prices of 128p and 130p. Her 25 years of experience in CEO and executive roles includes at internet platform businesses PayPal and eBay, and tech firms Symantec and Verizon.

The shares closed last week at 128p, having been 154p in early January and 102p in April.

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