Lookers Share Discussion Threads

[essentialinvestor] 09/11/2017 10:17

Ed, would expect any buyback to be modest.

CAPEX has been chunky of late and would think it would fall back some.

Agree on cyclicality, made the very same point elsewhere yesterday.

[ed 123] 09/11/2017 10:13

Q3 trading update today.

Much as expected except for the share buyback bit. It's a bad move, imo.

If the business had been a steady one without debt, then share buybacks would have been ok by me. However, Lookers is cyclical, arguably at the start of a dip and has c. £60 million of debt. It is not the business and not the time for buybacks. (Remember the 2009 rescue rights issue at 40p?)

I've held Lookers at times in the past. Watching but wary - I need to see how Brexit will impact the UK economy at large and the motor retail sector in particular.

The shares are about 100p atm. Cheap, when viewed against current trading, but what lies ahead?

[werewolfie] 27/10/2017 18:38

Nice rise. I was preparing to sell if the share price fell to 95p

[essentialinvestor] 24/10/2017 14:14

Yesterday was PDG warning as you are probably aware.

The focus for Look should be less on expansion at this point of the cycle,
and instead get net debt paid down.
Gearing has rapidly reduced over the past two years in fairness,
helped by the parts division sale.

[prospective investor] 24/10/2017 13:57

From experience; if the share price sinks before then there are people who know more than me! Especially before an update. Might take this loss

[essentialinvestor] 24/10/2017 13:21

Trading update 09/11.

[essentialinvestor] 23/10/2017 19:51

Share price trebled between 2011 and 2015.
The 2009 low was around 20 pence from memory, there has been some major money made here.

[essentialinvestor] 23/10/2017 16:43

T Cowie was my first sector buy back in the early 1990's, so have seen a few cycles.

Held Look previously as per postings, however does anyone notice the lack of any recent BOD purchases?, Made the same point last year.


It's fine the CEO emphasising a resilient expansive strategy, but the sector
is cyclical. You can make a case used car sales and aftercare help
counter this. I'm not convinced how much weight that carries if the UK consumer
begins to cut back. All just IMV only.

[pdoc] 23/10/2017 12:54

A firm in the same sector posted a profits warning.

Pendragon...



Income elastic demand - was always going to struggle with the incertainty over Brexit and falling real incomes, not to mention possible future rate increases.


I am in deep too - fingers crossed they have a better strategy.

[werewolfie] 23/10/2017 12:35

Any idea why it's so low? I bought in at 1.59 and foolishly never applied my stop loss.

[hardupfedup] 23/10/2017 11:15

down ----no volume cant make my mind up either

[prospective investor] 20/10/2017 10:40

Can't decide wether to sell these at a 10% loss. This company looks good on paper but seems to be held back by larger forces.

[hardupfedup] 03/10/2017 13:07

100k @ 120+ yesterday

[walbrock82] 19/8/2017 09:52

MUANGSING

When you lower the rate of return, the share price should move higher. By choosing 5%, Lookers would be £3.67, if post-tax earning gets maintained at £80m.

[muangsing] 18/8/2017 18:41

walbrock82

Out of curiosity what would the share price of Lookers be if the required rate of interest were to be 5% and not 11%.

Regards

[walbrock82] 18/8/2017 12:03

Car dealership market

To understand the car dealership market, you need to know what driving the sector. The last recession caused oversupply on the manufacturing side, so car subsidy schemes have helped stimulate demand.
The biggest change to car financing is the PCP financing model, where owners no longer own cars but lease it for two to three years. They pay for the depreciation of the car rather than the full price. Afterwards, the owners could pay the remaining balance or sign another PCP financing for another car.
This is called the PCP finance model.
The problem is the shift from oversupply in manufacturing to over supplying the retail side. As long as demand keeps rising there are buyers to be found.
Now, SMMT is forecasting the UK new car sales to fall for the first time in four years by 5% in 2017. In 2018, this will decline by 3%. Within two years, the demand for cars would have fallen by 10% in total.

Forecast

That will hit car dealers like Vertu and Lookers because they rely on volume and price. So, my analysis for Lookers is it will trade around 80 pence in the next 12 months.

For the breakdown of calculation and detail analysis on my share price prediction, click here:

[stewart64] 17/8/2017 16:04

A good point on operating margin made earlier. Lookers isn't bad at 2.7% for car sales but I do like to target margin, price to book and earnings. Two out of three aint bad, but cashed out at a small profit.

Feel we may get another August drift in the general market and cash might be better deployed in abeyance for later we will see.

[walbrock82] 17/8/2017 13:19

How much will Lookers fetch in the market?

How much will Lookers fetch in the market?

The market value is £425m and the enterprise value is £559m. But, how much will buyers pay for the company in the market?

One way is to assess how much Lookers has to pay for past acquisitions. Use info from Warwick Holdings Limited (acquired by Lookers in Nov. 2016) there is two possible valuation:

Price to sales = £776.72m;
Price to net assets = £701.7m.
This is a 20% discount to enterprise value.

Details of calculations are found here:

[tim 3] 16/8/2017 21:19

Problem with this and many other beat up retail stocks is people perceive there is a risk of a brexit consumer slowdown and if there is they could be hit hard,however there is little evidence of it so far although they did say they expect the British car market to srink 3% this year.

[stewart64] 16/8/2017 20:11

Well indeed that's probably why it has a price to book of one and a p/e of five. Wouldn't be surprised if it goes down with the current volatilty. Guardian sentiment priced in. Just like you pay a p/e of fifty and a price to book of five on Imperial Brands because it is deemed crash proof.

I did say it was a punt.

[simon templar qc] 16/8/2017 19:00

Read the Guardian on latest news on car sales particularly the piece on a possible recession.

[stewart64] 16/8/2017 15:46

Taken a punt today at 108. Price to book has fallen to 1.14 (425m/ 370m) and p/e may come in around 5 for 2017.

[walbrock82] 16/8/2017 11:02

The following is not an update on Lookers RNS!

On car dealerships, here are a few things to keep in mind:

1. Operating margins are razor-thin (typically 1%-2%), therefore a 1% drop can reduce profits by 50%.
2. This is one reason the car dealers buying all these franchises, which is to contain a sudden drop in earnings.
3. Keep an eye on inventory level because cars lose 15%-30% of their value in one year. For both Vertu and Lookers, their inventory period is around 80 days.
4. The good news is car dealership has huge property backing, so dispose of subsidiaries will raise a lot of cash, when borrowing tighten.
5. Both Lookers and Vertu, the more post-tax earnings produced, the more negative the free cash flow gets generated. Here is Lookers table:
6. However, positive free cash flow is possible if capex + acquisition is at 2 times depreciation, but not at the current 5 to 6 times level.

For a more board assessment, click