Vertu Motors Share Discussion Threads

[brucie5] 02/9/2021 13:24

Yes, also belatedly bought in this morning. Keeps Coming up on screens.

[microscope] 02/9/2021 08:22

I bought a small holding last week on the chart breakout, bullish trading update, upped profit forecast, likely dividend restoration and buyback news. Add in a discount to tangible nav and this looks like one of the cheapest shares around despite the share price improvement recently.I understand the potential risks of semiconductor shortages, another lockdown (heaven forbid!) and competition concerns, but this is valued at something like one thirtieth of Cazoo. That's a truly eye-popping difference. I'm not saying Vertu will reach a similar valuation of course, but it shows the upside potential to be substantial.Also since the buyback started, the shareprice has averaged about a 1p gain a day, and they are only about 500k of a possible 3 million spend into it. Were that daily average to continue we'd be near 80p by the end of it.Again I'm not saying that's likely, but the potential for around 70p short term feels realistic, and further growth thereafter.

[tole] 25/8/2021 18:05

https://masterinvestor.co.uk/equities/mid-week-small-cap-round-up-featuring-sureserve-up-global-sourcing-and-vertu-motors/Vertu Motors (LON:VTU) – brokers go for 80p-90p a shareWith the staggering amount of money that the likes of Cinch, Cazoo, WeBuyAnyCar, Motorway, CarWow and Spoticar spend on television advertising, it is surprising that any other companies in the motors market can do any business at all. Despite this, Vertu actually upped its profits guidance for the current year last Friday.The group, which is the fifth largest automotive retailer in the UK, operates from 116 locations, and has a network of 155 sales outlets (151 franchised sales outlets and four non-franchised sales) across the country.Its dealerships operate predominantly under the Bristol Street Motors, Vertu and Macklin Motors brand names.Like SigmaRoc, it is an excellent example of what 'buy-to-build' groups can achieve.Its acquisition strategy, together with a focused organic growth strategy, has built up an enviable national dealership network.After considering its trading in the six-month period to 31 August, the group has upped its estimate for the full year pre-tax profit, from the £40m to £45m range, to now expecting between £50m to £55m for the year.Used cars really have been the driver – such that analyst Sanjay Vidyarthi at Liberum Capital has a 90p price objective on his 'buy' note on the group, while Zeus Capital has an intrinsic value on the shares at 80p.After touching 53.6p the shares closed last night at 52.5p.

[loglorry1] 25/8/2021 10:12

In the recent video the CEO dismissed threat of EV and saw it more as an opportunity. Environmental groups say they need less servicing, less wear on brakes and less moving parts but I guess the jury is out really.

The direct to retail model adopted by Tesla may take off. Polestar are trialing it but I personally think there is plenty of room for showrooms. Most people want to touch, feel and speak to someone when spending £20K+.

The EV entry level price point is also higher so that will also help.

[boonboon] 24/8/2021 22:41

Not sure about real estate values per se, but what they are doing is adding more brands to existing sites to maximise revenues.If you have a big volkswagen dealership and you've got excess space you just add a Skoda dealership to the same premises.Get more people through the door as you have more options. Increase the aftersales and services revenue per site as well.

[mw8156] 24/8/2021 21:27

know next to nothing about the motor trade but I'm told the cost of running an EV is now much below that of an ICE especially for higher mileage driving. Seems the widespread adoption of EVs is being hampered by the lack of charging points, of home charging points and safe, quick charging as well as consumer hesitancy over new tech, replacement battery cost and vehicle range. Nevertheless, I see a lot of EVs and hybrids on the road around here though I live near Tesla's UK base so that may be a biased view.
Presumably servicing is much reduced and less complex for EVs compared with ICE. Would have thought that adoption of EVs may be quicker than people expect, though do take your point that meanwhile there is an opportunity for the likes of VTU and others to make hay. Not so convinced however by the real estate backing story should a portion of the trade move online. The largest showrooms and servicing areas might not be needed particularly if there are rationalisations and mergers among manufacturers and many are located in secondary locations so alternative use might require some imagination.

[theisland] 23/8/2021 18:56

Well these are all legitimate concerns / “known unknowns” and we are probably all speculating on an unknown future when you come to this very long term trends. What I would point out is that 1) it will take more than ten years before EV will be a meaningful part of the mix and by that time Vertu will likely have earned more than two times it’s market capitalization already given the absurdly low P/E we are paying; 2) it’s not clear at all if EV will have a negative impact on the after sale segment, as you seem to suggest in your comment, since EV need less service but at the same time you have a higher value added kind of job and higher clients retention; 3) all studies show that an omni-channel model is needed - only an insignificant part of sales will be carried on exclusively online: most clients still want a kind of contact with the physical world and test drive. Even in general retail it’s quite clear that physical retail won’t go away (look at the recent news about Amazon moving into physical retail) - online retail have a low penetration even in smaller items consumer products, let alone when you think about a big purchase like a car... “pure online” penetration will stay very low IMO. And Vertu is building his online sale channel anyway, which coupled with its physical store footprint will grant the best value proposition for customers IMO. I think that manufacturers may be interested in selling cars online in the future just because they want direct access to customers data - it is not a move to disintermediate car dealers. To what pro? Would you throw away a business model (car dealership) that has worked pretty efficiently fo more than 100 years to save a ridiculous 0.8% in net margin? Personally, I don’t think so. If this was the risk, why car dealers in US are trading at 2 to 3 time book value if they are in the same business and share similar risks? I think the reason for UK car dealers to trade on such low valuation is because they suffered some years of UK specific car oversupply before 2019, they suffered for Brexit and then were expected to suffer again with covid... Too many years of underperformance and investors have lost their patience... I don’t see manufacturers renounce to car dealers at all to save a tiny margin and then risk that a competitor, that may keep using car dealers, may gain market share. Omni-channel is the way to go IMO. Still think Vertu is extremely cheap and despite several uncertainties, risk-reward is very compelling - knowing nothing, you are still well protected by the value of its real estate property portfolio and the upside is meaningful. There is also the possibility that margins for car dealers will stay abnormally high for longer than the market is assuming given that it won’t be easy to satisfy in a short fashion the pent-up demand accumulated during these years - the average age of cars in UK is at historical high and at the same time you had a year lost for covid and the lack of semiconductors. Once the semiconductors shortage is resolved and under control, a couple of years with strong margins would be enough to earn half the market cap of Vertu. I don’t know of many stocks in this market that has still such a strong set-up - both fundamentally and technically.

[tole] 23/8/2021 16:57

https://www.fool.co.uk/investing/2021/08/23/a-bargain-penny-stock-to-buy-in-september/A 'bargain' penny stock to buy in SeptemberStuart Blair | Monday, 23rd August, 2021 | More on: VTUA pile of British one penny coins on a white background. Image source: Getty ImagesOver the past year, the Vertu Motors (LSE: VTU) share price has been able to double due to the second-hand car dealership's strong recovery. But at 51p, I believe that this penny stock is still undervalued, especially after its recent trading update. Here are the reasons why I might buy in September.Trading updateLast week, it was revealed that the company expects to make full-year pre-tax profit of £50m-£55m, up from previous expectations of £40m-£45m. This is due to increased demand, especially as the global semiconductor shortage has been hindering the production of new cars. As such, many customers have turned to second-hand cars, and Vertu has seen the benefits of this. The reluctance of some to use public transport due to the pandemic has also been beneficial for the company.The strong performance has allowed the car dealership to launch a £3m share buyback programme. This decision has been prompted by the fact that the board believe "the share price of the company ... [is] at a discount to the tangible net asset value". This is a major indication that this penny stock is underpriced. The Vertu share price also rose 8% as a result. Dividend payments are set to resume as well, and if they equal 2019 levels, shareholders can expect a yield of over 3%. Accordingly, shareholder returns look extremely strong, and this is one factor tempting me.The risksDespite the fact I feel that Vertu is underpriced, there are still risks that require consideration. Indeed, while the current semiconductor shortage may be a short-term benefit to profits, it also means that used vehicle supply may be restricted in the coming months. This would likely damage profits in the future, and the current strong performance may be a one-off.There is also a large amount of competition in the market. One example is Cazoo, which is going public through a SPAC (special purpose acquisition company) this Friday. Cazoo operates solely online, and vehicles are delivered straight to the customers' door. This bypasses the need for expensive showrooms, which strain profit margins. As such, there may be a view that Vertu is old-fashioned, and is not adapting quickly enough. This means it could get left behind.Why would I still buy this penny stock?Despite these fears, I still believe Vertu is deeply undervalued. In fact, in its launch, Cazoo is going to be valued at £6bn, while Vertu is only valued at a meagre £188m. This is despite the current unprofitability of Cazoo.To further demonstrate the company's undervaluation, I must also point out that it has a price-to-earnings ratio of far below 10, and a price-to-book ratio of just 0.7. Both of these multiples are well below the market average, implying that the stock has plenty of room to rise. It's therefore no surprise that the board is looking to buy back shares. This is why I am willing to overlook the negatives in this company and may buy some shares in September.

[mw8156] 23/8/2021 11:01

what, I wonder is the medium to long-term future for motor retailers? EVs to take a large share and, according to the Times, China set to flood the market with cheap EVs. Fewer Western manufacturers with more restricted ranges? After sales and servicing, a profitable component of retailers' turnover will decline and much of the business to migrate on-line?

[theisland] 22/8/2021 19:56

Margin are thin because it's the nature of the business - car dealership - and despite being thin they have been very stable in the past. The real question is how much you are paying for their sustainable margin? And I think we are paying a very cheap price here. I also disagree when you say that Vertu is at the whims of manufacturers: for instance, manufacturers need car dealers as much as car dealers need manufacturers and, as a proof of this balanced relationship, manufacturers helped dealers during Covid by reducing their net working capital and therefore improve their cash flow. Manufacturers also provide low cost financing for dealers inventory... Expecially, when you are one of the top dealer in a particular state, I would argue that you become quite important for manufacturers. Competition is tough but the sector is consolidating and size should give Vertu a big advantage. The company already said it will reestablish a dividend plus buy back stocks, so there is no reason to worry about capital allocation either... We are paying P/E of around 4 times 2022 earnings and probably 6 time sustainable earnings (IMO) for a business that if you look to the numbers is more stable than you might think and generated a lot of free cash flow in the past. Look at what multiples car dealers are trading in US... I don't see why Vertu would deserve such a low valuation.Still trading below the value of its real estate properties.

[mw8156] 22/8/2021 17:52

Lack of divis is serious if you depend on them partly to fund old age long-term care, share has meandered for years, bonuses paid raise questions over what the priorities are for this company. Will have to hope that the margin improvement you indicate result in us all benefitting in due course.

[daneswooddynamo] 22/8/2021 17:09

Fair enough, for every buyer there is a seller, best thing to remember imo. As for margins they are currently through the roof which is why the dealers have upgraded several times in short order. Given the share prices have doubled in the last 12 months the lack of dividends is nothing to worry about

[mw8156] 22/8/2021 16:53

have to agree to differ, why pay a performance bonus at all when the CEO has expressed reservations about deserving it, the business has been closed for half the year, the shareholders have received no dividend for 2 years, where the margins in the industry are wafer-thin, where the management is largely hostage to manufacturer's whims and competition is cut-throat including upstarts such as Cazoo and Cinch?

[daneswooddynamo] 22/8/2021 15:43

Fifth largest dealer group in the UK with over 150 sites. His compensation looks good value to me but more importantly he is very aligned with shareholders as he is loaded up with equity

[davebowler] 22/8/2021 13:41

'Undercover Boss' on 4 gave a good impression of Vertu boss Robert Forrester overall.

[theisland] 22/8/2021 12:26

IMO one should focus less on the stock performance and more on the underlying business performance. CEO compensation is in line with the rest of the industry and I guess that executive compensation is quite high in the industry because having competent management to run these kind of businesses is crucial. It’s a rather though business, not the one every idiot can run it... Everybody point out to the bad performance of the stock going back to 2007... this makes no sense to me: all car dealers went public at unreasonable high valuations during those times and most have performed even worse than Vertu (look at Pendragon and Lookers charts for example). All in all, Vertu CEO is doing a good job if you look to the numbers and I would prefer to pay a high salary to a good CEO than a low salary to an incompetent one. He built the 5th car dealer from scratch in only ten years through M&A without doing major mistakes, which I don’t think it’s an easy task... of course he had to compromise on some dilution in the past to grow enough through M&A to gain the scale advantage for being consistently profitable in this sector, but now it seems clear from the last update that the company have the resources to keep growing externally financing growth with free cash flow and a little debt if needed - so dilution should not be a problem anymore. Rerating needed here IMO.

[mw8156] 22/8/2021 11:31

what amuses is that the executive directors, according to the report, expressed a willingness to forego their bonuses but were awarded them anyway by the remuneration committee. Why? when the performance was so bad during the pandemic. Also, they did not want further contribution to their pensions, possibly because of the LTA complication, and were reimbursed through their salaries.
Those in a similar position in the public sector are not so fortunate and just have to grin and bear the punitive LTA charges.

[gutterhead] 22/8/2021 09:01

Quite reasonable versus ceo of Marshall’s motor group.

[wad collector] 21/8/2021 22:42

I am afraid that is the nature of the world of renumeration ....but not much that the PIs can do about it , as the decisions are voted through by Investment Managers who share the same long snouts..

[mw8156] 21/8/2021 18:32

a/c to investors' champion website the share has declined from 75p since 2007 and the CEO has been rewarded with £590K and 690K in the last 2 years, not bad for a plc with a cap of less than £200m, and dividends have been absent. To be fair, Vertu is not alone, the CEO of Cambria has also been handsomely rewarded though Cambria's share price has a better record. BoD should realise that the owners are the shareholders.

[otemple3] 20/8/2021 22:33

Just type Vertu annual report into Google and it takes you straight there. It's in the results section, the first option in the menu. Very clear directors remuneration section, plus a section showing possible scenarios for year based on various performance metrics. Doesn't get much clearer than that so am not sure what you are finding difficult here?

[mw8156] 20/8/2021 21:28

investors are wary, having seen poor returns these last few years while Directors have been taking out very large salaries, very difficult to access the precise figures or the Annual Report on their website. Granted this is a business with a large turnover. Have to hope the business owners, ie shareholders, will now be rewarded with promised dividends and may be capital appreciation.

[ih_676530] 20/8/2021 13:55

Today's announcements will be covered in the news over the weekend(Already trending via The Evening Standard , Yorkshire Post, Business Live, Proactive Investors) and I'd expect more City's brokers to issue new price targets (City Confidential new PT is 74p) .

It looks like the share price broke the 50p's barrier this morning, nicely settled above that line& traders bagged their 5-10% profit so I'd expect the share price to gain more strength next week and continue to climb up on Monday

[boonboon] 20/8/2021 11:23

Still currently in half one now though.