ASE’s executive chairman Mike Jones reports on the dealers listed on the stock market
January has proven to be a quiet month for the listed motor retail stock share prices with limited levels of movement following on from a variety of announcements.
The main announcement within the month was a trading update for Lookers ahead of the full year results announcement in March. The statement was bullish in nature with ‘trading during the quarter ended December 31, 2010, in excess of both budget and the prior year’ with results for the full year ‘to exceed management expectations’.
In addition to strong profit forecasts, Lookers also reported that cash generated through dealership disposals had been used to pay down debt. Given the general stock market concern over motor sector debt levels this news, allied to the positive trading update, could have been expected to provide a boost to the share price.
Indeed, broker Panmure Gordon raised its price target for the share from 70p to 80p on the back of the news. Following a brief rally on the announcement, there has been a retrenching of the share price, with the value falling back below 60p from 64p at the time of the announcement.
Lookers has invested significantly in recent years in emphasising the performance of its aftersales business using this as a differentiator during comparisons with the remainder of the UK-based listed motor retailers. It will be interesting to view the extent to which this share is viewed as a safe haven in the storm and insulated against the registration volume statistics.
For the remainder of the listed stocks, there has been little news and little price movement. There is a general pervasive nervousness over how trading will map out in 2011 and this has led to very limited price variations as the market adopts a ‘wait and see’ approach. Vehicle sale volumes are universally forecast to be lower in 2011 and we are likely to be faced with a number of months of negative press stories as registrations fail to match the scrappage-assisted numbers during the first five months of 2010.
This could lead to some rocky trading through the first few months, particularly if the sector is trying to plead poverty looking for additional government support. At current price levels some of the dealer groups look attractively valued with very limited goodwill currently priced in. This could lead to bid speculation or the potential for significant share price gains for those who correctly predict the rally.
Who is Mike Jones?
He‘s executive chairman of ASE Global. If you want to talk to him about this column call 0161 493 1930