I have written about Aston Martin numerous times before and met many of you via regular updates on this company. I am famous for saying that even if Aston Martin burned all the cars and started selling t-shirts, it would still be worth £5B due to its brand value, hence it remains largely undervalued.
Although we have moved from 600M valuation where we built the core position, to over 2B, we are still not even at half of brand value, despite all the great developments from Formula 1, DBX and strong leadership.
This year, the stock price has been hovering between 1855 and 2200 (2273 on 02.02.21) and I have been trading at exactly these levels. Although trading around the position has been successful, I think that the consolidation phase will soon result in an outbreak. Consequently, I bought more around 1855 last week and expect us to cross 2300 soon and grow rapidly from there.
𝘽𝘼𝘾𝙆𝙍𝙂𝙍𝙊𝙐𝙉𝘿
Aston Martin Lagonda Global Holdings plc is a United Kingdom-based holding company that designs, engineers, manufactures and markets cars. The Company’s model line-up comprises three models, such as grand tourer (GT) (DB11), sports car (Vantage) and super GT (DBS Superleggera). It also produces four-door and four-seat sports coupe (Rapide S). It also develops and produces special edition models, such as Vantage GT12, Vantage GT8, Vanquish Zagato Coupe, Vanquish Zagato Volante, Vanquish Zagato Speedster, DB4GT Continuation and Aston Martin Vulcan.
It also provides maintenance and accident repair service, as well as the restoration of Aston Martin models through its servicing business, Aston Martin Works Limited. The Company’s subsidiaries include AM Brands Limited, AM Nurburgring Racing Limited, AML Italy S.r.l, AML Overseas Services Limited, AMWS Limited, Aston Martin Capital Holdings Limited, Aston Martin Capital Limited and Aston Martin Holdings (UK) Limited. (Source: Refinitiv)
𝙁𝙐𝙉𝘿𝘼𝙈𝙀𝙉𝙏𝘼𝙇𝙎
Citigroup has recently re-affirmed its Buy rating on the stock with PT of 2800. We also had upgrades from HSBC and Goldman Sachs, while JPM is remaining neutral. Let us look closer into fundamentals:
🔹️ Market Cap of £2.2B
🔹️ Revenue of 0.61B in FY0, 1.1B in FY1 and 1.45B in FY3
🔹️ Price to Sales at c.2
🔹️ Debt to Capital at 59.63%
🔹️ Cash of £454M
🔹️ EBITDA margin of 14 – 20%
The company is HQed in Warwick and its Revenue derives mainly from Sales of vehicles (87.5%) and Sale of parts (9.25%).
It has a very diversified geographical breakdown with EMEA bringing 30%, the Americas and Asia around 26% and UK around 17.5%.
The biggest Institutional Investors are Invesco at 4.54%, Permian at 3%, Fidelity at 1.62% and Vanguard at 1.56%.
𝙁𝙊𝙍𝙈𝙐𝙇𝘼 𝟭 𝙖𝙣𝙙 𝘿𝘽𝙓
The biggest selling points to me in terms of Aston Martin business are 1) coming back to Formula 1 and 2) launching its first SUV – DBX.
Formula 1 is naturally one of the most prestigious sports and it is indispensable for brands such as $RACE and Aston Martin to compete in motoracing. Having ex-Champion – Sebastian Vettel – in its lineup, has brought a lot of positive PR to the brand. Lance Stroll, the son of the Chairman Lawrance Stroll, is the 2nd driver – a very promising young talent. Aston Martin was also chosen as safety car this season, all of which is important for the brand and the heritage in motorsports. So far this season, Seb has accumulated 30 points while Lance has gained 14. That puts Aston Martin at no6 in 2021 Constructor Standings.
DBX is even more important in terms of balance sheet and the future of Aston Martin. Many consider it the best SUV on the market. Importantly, drawing the history lesson from the past – it was Cayenne that saved $PAH3.DE in terms of business metrics. Currently, Porsche sells over 200,000 cars a year with over 100,000 coming from Cayenne and Macan SUVs. That should put things into perspective – the truth is that SUVs are cash cows for the luxury automakers.
𝘾𝙊𝙉𝘾𝙇𝙐𝙎𝙄𝙊𝙉
Last year, Aston Martin was taken over by Lawrance Stroll – Canadian billionaire who made his money in fashion. Since then, we have experienced a cash injection, reduction of debt, coming back to Formula 1, the birth of the 1st SUV, partnership with Mercedes and many more.
The turnaround plan that Lawrance has implemented seems to be working and, once we have the numbers from DBX, I expect it to be fully reflected in the Earnings soon.
One of the biggest threats to the company is the EV market – i.e. $TSLA and $NIO taking over the market for cars. Aston Martin is quite late to the game and is expected to produce EV/hybrids from 2025, thanks to its partnership with Mercedes.
The most important thing for Aston is its brand and cash flow from DBX, as it is one of the more powerful British Brands and people who spend 200,000+ on a car, do not really look for EVs just yet. From my perspective and experience, AML has really stepped up its marketing and branding game, hence – the cash flow will be the remaining piece of the puzzle that can send the price up, hopefully till circa 3000 till EOY.
Interesting times to come. What do you think?
MJ
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