Cambria Automobiles Share Discussion Threads

[4spiel] 08/7/2015 14:49

Post 16 Interesting link. Young Graduates always moan but don't mind earning the money. they have good team leaders that have been in car sales since leaving school.CEO has his head screwed on.

[effortless cool] 08/7/2015 14:44

vaneric,

Thanks for responding and for the background info.

I'd suggest there are two reasons why motor retailers have occasional notable failures.

1. It is a highly cyclical business with small profit margins. When the cycle is adverse, the least efficient operators will go bust.

2. The motor sales business attracts more than its share of shysters.

Regarding the first one, the cycle is currently favourable, so it's not a concern.

Regarding the second one, I take encouragement from the Chief Executive's high level of share ownership and lack of sales, the fact that he did not include himself in the recent issue of options, and the disciplines of the financial reporting regime for a listed company. None of these are fool-proof, which is why I was interested in knowing whether you had any specific issue with CAMB.

[vaneric] 08/7/2015 14:06

Effortless Cool
5 Jul'15 - 10:09 - 7 of 16 0 0


There seems to be something of a pattern to your posts, vaneric.

TESCO - TSCO
vaneric - 29 Jun 2015 - 13:30:56 - 15195 of 15246
bigboyo, I've been in retail at the front line since 1965 owning my own business for 22 years, you're trying to teach granny how to suck eggs.

Have you actually got anything constructive to contribute on CAMB? What specific concerns do you have?

I don't have any specific concerns, just a general observation, As for a pattern to my posts they're just factual, My entry into the motor trade was in March 1950, in 1965 I bought my own business a retail grocery 'open all hours' shop which I extended into a mini supermarket complete with petrol, car repair garage and used car site for 50+ vehicles, I sold that in 1988 and for the rest of my active working life ran a van sales business from home and through the auctions hence the vaneric nickname.
The reason for my comment was simply that as I said these businesses come and go, I've seen many of them the most recent being Carcraft.

[effortless cool] 08/7/2015 13:11

That prompted me to look at "glassdoor" which, unfortunately, just has one highly negative but well-considered review.

[4spiel] 08/7/2015 13:02

The thing about this company is the people quality and in particular how this company invests in their people to work like partners and they expect a lot of them. This is not rising just for the usual reasons - it's a growth company.

[4spiel] 08/7/2015 13:02

people quality

[effortless cool] 06/7/2015 21:25

Thanks, Graham. Appreciate the feedback.

[graham1ty] 06/7/2015 20:11

Effortless, great new thread. I have afairly big position as well, so hope you are right

[mortimer7] 06/7/2015 15:48

Whilst it's quiet - some info from todays figures on the unit performance of the bigger market share holders. Merc, Nissan & VW winners in June.
Unit regn % increase comparisons 2014 vs 2015
Month of June / 6 months YTD
All Makes 12.93% / 6.96%
BMW 14.55% / 6.98%
Ford 12.52% / 2.07%
Merc 16.56% / 17.12%
Nissan 16.61% / 17.61%
VW 26.89% / 8.49%

[jaf111] 06/7/2015 14:34

Yes definately agree that the 12.9% is very strong....I wonder whether we are seeing the first effects of the pensions revolution???

[davidosh] 06/7/2015 10:37

Thanks Mortimer7....that is an exceptionally strong figure for June.

[mortimer7] 06/7/2015 09:14

A brief summary of SMMT figures released today for June UK new car registrations:
7.0% growth in the first half of 2015 to the highest half-year total on record with 1,376,889 cars registered between January and June – higher than the previous record of 1,376,565 in 2004.
For the month of June growth in the market shows 12.9% increase 257,817 units.

Hardly a day for the market to be receptive to this kind of news, but it demonstrates the underlying trend for new car retailers such as CAMB is ongoing.

[mortimer7] 06/7/2015 09:13

SMMT figures released today for June UK new car registrations:
7.0% growth in the first half of 2015 to the highest half-year total on record with 1,376,889 cars registered between January and June – higher than the previous record of 1,376,565 in 2004.
For the month of June growth in the market shows 12.9% increase 257,817 units.

Hardly a day for the market to be receptive to this kind of news, but it demonstrates the underlying trend for new car retailers such as CAMB is ongoing.

[effortless cool] 05/7/2015 10:09

There seems to be something of a pattern to your posts, vaneric.

TESCO - TSCO
vaneric - 29 Jun 2015 - 13:30:56 - 15195 of 15246
bigboyo, I've been in retail at the front line since 1965 owning my own business for 22 years, you're trying to teach granny how to suck eggs.

Have you actually got anything constructive to contribute on CAMB? What specific concerns do you have?

[vaneric] 05/7/2015 09:41

I've been in the motor trade for over sixty years, I've seen so many of these come and go always ending up broke, their investors money down the drain.

[effortless cool] 05/7/2015 08:40

Cheers, David. I'll look in to adding that information next weekend.

[davidosh] 05/7/2015 00:46

EC....Excellent new thread btw and thanks for adding the link. It would be interesting to see the SMMT figures over the last three years and the Cambria organic growth trend too.

[effortless cool] 04/7/2015 16:27

Thanks - I have added a link to the SMMT news releases to the header.

[davidosh] 04/7/2015 16:11

The June SMMT figures should be out on Monday or Tuesday and the growth shown in those annual comparatives are usually bettered by Cambria within their network.

[effortless cool] 04/7/2015 11:07

Historical updates transferred from the header.

======================
Update 3 December 2015
======================

The recent full year results were a bit worse than my projections, mainly because I overestimated revenue by £2.7m. I have now updated my model to reflect this latest information, and also included a few enhancements, mainly related to acquisitions.

The results are very encouraging. I am forecasting revenues of £558m for 2016 and £573m for 2017, with corresponding pre-tax profits of £9.1m and £9.3m. I also anticipate the business throwing of cash over this period, at a rate of about £11m each year.

I have rolled forward my valuation base period by six months to cover the period 2016 H2 and 2017 H1. Still using target PE ratio of 10, and adjusting for cash, dividends and options, my target price increases to 91.3p. That represents 22% upside from the current price of 75p.

I see this as erring at the conservative end. In particular, the new banking facilities give Cambria serious firepower for further acquisitions and/or to invest in existing franchises. Given their excellent record in this regard, further value-enhancing investments are surely likely.

======================
Update 24 January 2016
======================

On 11 January, CAMB announced an acquisition and disposal, and I have amended my projections to try and allow for these. Limited information is available, so the projections are less robust than normal.

My updated revenue forecasts are £592m for 2016 and £602m for 2017. Based on post-tax profits of £9.2m over the period 2016 H2 and 2017 H1, a target PE ratio of 10, net cash of £10.1m and adjusting for options, my target price jumps materially to 99.9p, which represents at 27% premium to today's price of 78.5p.

====================
Update 11 March 2016
====================

I have updated my projections to reflect the 7 March trading update. In summary, this seemed to imply lower revenues but higher margins than I had previously anticipated. My updated revenue forecasts are £586m for 2016 and £592m for 2017. My updated target price is 98.3p, which represents a 24% premium to today's price of 79.0p.

==================
Update 15 May 2016
==================

CAMB's interims for 2016 were close to my forecasts, providing strong encouragement to the reliability of my model. Revenue remains challenging to forecast, however, due to acquisitions and divestments. The interims also flagged £13m of investment in the Barnet and Swindon properties over the next three periods, which I have now incorporated into the model. By the end of my valuation period, these investments have sucked cash out without yet materially boosting revenue; I have therefore moved my target PE ratio from 9 to 10, to reflect their future potential.

My revised forecasts are:
# Revenue - 2016: £606.4m, 2017: £652.9m
# Pre-tax profit - 2016: £12.0m (£1.8m exceptional), 2017: £10.8m
# EPS - 2016: 9.6p, 2017: 8.5p
# DPS - 2016: 0.9p, 2017: 1.0p
# Net cash - 2016: £5.1m, 2017: £11.1m

Particularly notable is CAMB's continued ability to throw off cash, in spite of the very high cap ex on the two properties mentioned. My updated valuation is 100.4p, representing a 29% premium to today's price of 78.0p. In my view, this remains a Buy.

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Update 24 November 2016
=======================

Contrary to what the subsequent share price action might suggest, I thought CAMB produced a good set of results earlier this week. I have now updated my model, the main changes to the projections being to factor in a 5% fall in new vehicle sales over 2017 and to include a £31m investment in existing properties over the next two years.

Updated forecasts are as follows:
# Revenue - 2017: £662.8m, 2018: £655.9m
# Pre-tax profit - 2017: £12.1m, 2018: £11.7m
# EPS - 2017: 9.7p, 2018: 9.4p
# DPS - 2017: 1.05p, 2018: 1.2p
# Net cash - 2017: £1.0m, 2018: -£0.3m

The resilience of the cash flow is again notable, in spite of the massive capex planned. The drop in revenue and profits for 2018 is presumably what is putting punters off, but I see plenty of upside in these forecasts.

Applying a PE ratio of 10 (reflecting the potential benefits of the capex), I get an adjusted valuation of 87.2. At a 45% premium to today's price of 60p, I rate this a STRONG BUY.

=======================
Update 15 January 2017
=======================

I have reviewed and revised my forecasts based on the AGM trading update of 4 January, and to try and better align my 2017 revenue figure with consensus estimates.

Updated forecasts are as follows, along with latest consensus (where available) in brackets:
# Revenue - 2017: £644.4m (£644.5m), 2018: £654.7m (£660.5m)
# Pre-tax profit - 2017: £11.7m, 2018: £12.2m
# EPS - 2017: 9.3p (8.3p), 2018: 9.9p (8.5p)
# DPS - 2017: 1.05p (0.95p), 2018: 1.20p (1.00p)
# Net cash - 2017: -£0.3, 2018: -£0.7m

Applying a PE ratio of 10, I get an adjusted valuation of 87.4p. At a 40% premium to today's price of 62.5p, I rate this a STRONG BUY.

My top line is consistent with consensus but my EPS figures are higher. I expect upgrades to broker earnings forecasts in due course.

Another key factor here is that my forecasts include capex of £8.5m per half year. This reflects the planned investment in the estate and is way higher than historical capex. This reduces my valuation, as cash is lower than it would otherwise be, but provides a strong platform to drive revenue growth beyond the projection period.

=======================
Update 12 March 2017
=======================

I have reviewed and revised my forecasts based on the trading update of 7 January, and again to try and better align my 2017 revenue figure with consensus estimates.

Updated forecasts are as follows, along with latest consensus (where available) in brackets:
# Revenue - 2017: £631.0m (£631.8m), 2018: £639.2m (£647.4m)
# Pre-tax profit - 2017: £12.7m, 2018: £12.6m
# EPS - 2017: 10.2p (8.25p), 2018: 10.1p (8.50p)
# DPS - 2017: 1.05p (0.95p), 2018: 1.20p (1.00p)
# Net cash - 2017: £1.6, 2018: 1.8m

Applying a PE ratio of 10, I get an adjusted valuation of 86.0p (I have refined my methodology since January). At a 30% premium to today's price of 66.0p, I rate this a STRONG BUY.

My top line is consistent with consensus but my EPS figures are higher. I expect upgrades to broker earnings forecasts in due course.

Another key factor here is that my forecasts include capex of £8.5m per half year. This reflects the planned investment in the estate and is way higher than historical capex. This reduces my valuation, as cash is lower than it would otherwise be, but provides a strong platform to drive revenue growth beyond the projection period.

[effortless cool] 04/7/2015 11:01

With apologies to rambutan2, I have set up new thread with a more informative header.

[effortless cool] 04/7/2015 10:58

IMPORTANT AND TIME SENSITIVE INFORMATION:


This is Alex Bossert of Bossert Capital. We own ~1.2m shares in Cambria.

If you own shares in Cambria please reach out to me immediately: [e-mail] or via Twitter:



Also, I want you all to be aware that you do not need to tender by September 3rd because if Cambria does end up getting 75% support, which then means they can force a delisting, we all have a 14 day window to tender afterwards.

"If the Offer becomes unconditional as to acceptances, it will remain open for acceptance for
no fewer than 14 days from the date on which it would otherwise have expired."

See page 48 of the offer doc:
hxxp://www.cambriaautomobilesplc.com/resources/camb_offer_final.pdf



There is lots of chatter on Twitter regarding Cambria. Here are some of the recent tweets:





























=============================================================

I believe that Cambria Automobiles (CAMB) is currently materially undervalued (58.5p), will significantly beat broker forecasts and will benefit from substantial broker upgrades of future year results.

In its own words: “Cambria was established in 2006 with a strategy to build a balanced motor retail group through close cooperation with our manufacturer partners and the self-funded acquisition and turnaround of underperforming businesses”. As set out below, it seems to be executing this strategy admirably well. It currently operates 29 dealerships representing 46 franchises and 18 brands across the UK.

Cambria is a simple business – it sells new and used cars and provides after sales services on them. Its accounts are simple too, showing consistent ratios and trends, with a clear and reliable seasonality (H2 is better than H1), albeit complicated by the effect of acquisitions.

New car sales is the fastest growing area of the business, increasing at 16% per annum (after adjusting for acquisitions) and is just overtaking used car sales as the largest segment. It is also, unfortunately, the segment with the lowest gross margin, varying between 6-7%. It would, however, seem reasonable to assume that it is a more reliable source of aftersales service than used cars.

Used car sales have a higher gross margin (9.0-9.5%) but a lower growth rate (6% per annum, after adjustment for acquisitions).

After sales service is by far the highest margin segment (40-43%) but is also the smallest and the slowest growing at just 1% per annum, after adjusting for acquisitions.

The gradual deterioration in business mix described above is more than countered by the overall growth in the business, combined with the high operational gearing. Administrative expenses have dropped from 13.0% of revenue in 2012 H1 to 10.6% in 2015 H1. This trend has been helped by periodic acquisitions – one a year in 2013 to 2015.

A Land Rover/Jaguar dealership generating revenues of £46m per annum was acquired in July 2014. This was anticipated to be “significantly earnings enhancing” in the current financial year.

A further Land Rover franchise generating revenue of £32m was acquired in May 2015, so does not yet contribute to any published figures. This was anticipated to be “immediately earnings enhancing”.

Acquisitions have been financed through cash and debt, and the company has historically been very frugal with it equity capital. It did, however, grant 5m options to staff recently, exercisable from January 2020 at 47p.

The balance sheet is not conventionally strong, showing negative net current assets. However, this is just a reflection of the working capital characteristics of the business and Cambria has consistently generated cash in recent years through more efficient working capital management.

Cambria is a relatively small company, with a market capitalisation of £58.5m at 58.5p. It is only covered by one broker – N+1 Singer – and their forecasts fall well short of my projections.

For 2015, the broker forecasts revenue of £514.4m and pre-tax profit of £7.35m; my equivalent figures are £526.5m and £8.36m. The discrepancies for 2016 are even greater, with broker forecasts of £553.5m revenue and £8.35m PTP significantly lagging my projections of £587.0m and £10.64m, respectively.

I am as confident as one can be that we will see an “ahead of market expectations” announcement in Cambria in due course.

The company pays a small but progressive dividend and should be highly cash generative over the period of my projections. Projected net cash of £15.7m at end-2016 easily provides scope for further bolt-on acquisitions.

Note also that Cambria is 40% owned by its Chief Executive, which I regard as a major positive.

I tend to value companies based on their projected earnings for the following two half years (2015 H2 and 2016 H1, in this case), adjusted for net cash at the end of the period and any potential dilution from options, etc. For Cambria, my target prospective PE ratio is quite low at 10, reflecting the fact that it is cyclical business at a favourable period of its cycle. I am forecasting 7.04p EPS.

This gives a target price of 75.9p, after adjusting for net cash, dividends and options. This represents a 30% premium to the current share price.

I have made a serious commitment on this share, buying 203.5k at an average of 59.0p. (Since increased to 272.7k at an average of 58.7p on 9/7/15).

[Earlier updates transferred to post 1]


=======================
Update 29 December 2019
=======================

I have finally caught up with my modelling here after a gap of over two and a half years.

Updated forecasts are as follows, along with latest consensus (where available) in brackets:
# Revenue ............... 2020: £684.5m (£678.6m), ... 2021: £696.5m (£696.4m)
# Reported net profit ... 2020: £10.1m, .............. 2021: £10.1m
# Adjusted net profit ... 2020: £10.1m (£9.9m), ...... 2021: £10.1m (£10.0m)
# Reported EPS .......... 2020: 10.1p, ............... 2021: 10.1p
# Adjusted EPS .......... 2020: 9.6p (9.9p), ........ 2021: 9.7p (10.0p)
# DPS ................... 2020: 1.20p (1.10p), ....... 2021: 1.30p (1.10p)
# Net cash .............. 2020: £4.3m, ............... 2021: 7.5m

Applying a PE ratio of 10, I get an adjusted valuation of 91.1p. At a 32% premium to today's price of 69.0p, I rate this a STRONG BUY.

A key factor here is that my forecasts include capex of £7.5m per half year. This reflects the planned investment in the estate. This reduces my valuation, as cash is lower than it would otherwise be, but provides a strong platform to drive revenue growth beyond the projection period.

=======================
Update 12 January 2020
=======================

A further quick revision based on the AGM trading update.

Updated forecasts are as follows, along with latest consensus (where available) in brackets:
# Revenue ............... 2020: £659.6m (£682.5m), ... 2021: £685.1m (£697.4m)
# Reported net profit ... 2020: £10.5m, .............. 2021: £10.1m
# Adjusted net profit ... 2020: £10.1m (£9.7m), ...... 2021: £10.7m (£9.8m)
# Reported EPS .......... 2020: 10.5p, ............... 2021: 10.7p
# Adjusted EPS .......... 2020: 10.0p (9.7p), ........ 2021: 10.2p (9.8p)
# DPS ................... 2020: 1.20p (1.05p), ....... 2021: 1.30p (1.05p)
# Net cash .............. 2020: £3.8m, ............... 2021: 8.3m

Maintaining a PE ratio of 10, I get an adjusted valuation of 94.5p. At a 35% premium to today's price of 70.0p, I rate this a STRONG BUY.

A key factor here is that my forecasts include capex of £7.5m per half year. This reflects the planned investment in the estate. This reduces my valuation, as cash is lower than it would otherwise be, but provides a strong platform to drive revenue growth beyond the projection period.

=======================
Update 1 February 2020
=======================

And another quick revision based on the Leven Cars acquisition.

Updated forecasts are as follows, along with latest consensus (where available) in brackets:
# Revenue ............... 2020: £685.6m (£689.15m), .. 2021: £727.9m (£718.6m)
# Reported net profit ... 2020: £10.0m, .............. 2021: £11.1m
# Adjusted net profit ... 2020: £10.2m (£9.9m), ...... 2021: £11.1m (£10.1m)
# Reported EPS .......... 2020: 10.0p, ............... 2021: 11.1p
# Adjusted EPS .......... 2020: 10.2p (9.7p), ........ 2021: 10.7p (10.1p)
# DPS ................... 2020: 1.20p (1.1p), ........ 2021: 1.30p (1.1p)
# Net cash .............. 2020: £4.4m, ............... 2021: 9.6m

I have a made a few small enhancements to my valuation calculation, hence there is a little inconsistency with my prior forecasts.

I have also changed my target PE ratio methodology, which was previously just a pick. I have now set it to 75% of the market median. I consider this low multiplier is appropriate due to the cyclical nature of the business. This gives a target PE ratio of 9.8 (versus 10 before), and I now get an adjusted valuation of 94.5p - exactly the same as before. At a 38% premium to today's price of 68.5p, I rate this a STRONG BUY.

A key factor here is that my forecasts include capex of £7.5m per half year (no change). This reflects the planned investment in the estate. This reduces my valuation, as cash is lower than it would otherwise be, but provides a strong platform to drive revenue growth beyond the projection period.

============
Useful links
============

Investor relations:

Broker forecasts:

Monthly data on new car registrations:

A very interesting post from Ethelwalch, who knows the business well:

Link to 2016 AGM report from Graham1TY:


Alex Bossert (US hedge fund manager) makes a compelling long-term investment case for Cambria, at as 10 January 2018:

[mortimer7] 15/6/2015 17:57

250k transaction after the bell at 58.75p £146875.00. (Presume it's a buy)

[mortimer7] 04/6/2015 09:03

Figures released today by the SMMT show a steady 2.4% growth in the UK new car market for the month of May. New car registrations up 2.4% in May to 198,706 units, marking 39th consecutive month of growth.

[mach100] 02/6/2015 10:59

And over a million today at 59.5p, This will certainly rerate when the seller is cleared. No wonder it has been struggling for leg-room on the charts. The underlying strength is evidenced by these large sells not impacting the share price and today we have even seen a small tick-up.