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Bloomberg are very bullish on US car dealers and I am wondering whether this will transfer over to the UK. Pendragon does own some US dealerships.
Thanks for your sensible input. Always need to keep our feet on the ground. It is always confusing when you get so many different opinions from economists as to whether or not there will be a second recession. Then you have the politicians in the Eurozone who can never seem to get a grip and sort out Greece and the rest once and for all.
If your high end price of 19p is reached in 12 months that is a 40% increase in 12 months which would make this a strong buy in my book. I am just hoping the directors meet their adjusted EPS target. Would they make that the target if they did not think it was achievable?
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I see the Exec share option scheme only comes into play for 2012 if the adjusted EPS for 2012 is 2.45p, giving 30% of the options, with EPS of 3.29p required for 100% of the options.
The CEO obviously had to get the money to take up his 17m+ rights from somewhere. His shareholding used to be worth £17m+ but now is c. £4.6m, so he, more than anyone, needs to take positive action to improve shareholder value.
EPS of 2.3p for 2011 is indicative of a share price of 18.4p on a conservative P/E of 8. Extrapolating this for 2012 with reduced interest charges indicating a net profit of circa £45m we get an EPS of 3.17p. On a P/E of 8 this indicates a share price of 25p. Consequently I view Pendragon as a strong buy at the current asking price of 13.5p.
It cut off the "£1.5m" anticipated operating costs for Quicks. I would view this business to be a positive factor going forward because it ensures that Pendragon has presence in all sectors of the market and they will use the internet for marketing once again.
After reading your comments I thought I would look at the AR again and make the following observations. In the retail motor trade profit from car sales has to be only a small proportion of sales due to the vast majority of sales revenue going back to the manufacturer and 20% VAT going to the Government. Add in the current economic climate and you get the very slim margins on new car sales. That is why car sales are used to get after sales which is where Pendragon is concentrating its strategy. Gross margin for after sales is 59.6%, compared with 7.9% for new car sales and 9.7% for used car sales. You will see the margins have held up well considering trading conditions. So that is positive. They also comment on their internet presence and new phone apps which is another major positive. However the most profitable businesses are the support businesses, the star of which is the Dealer Management Systems service. It also includes the parts wholesale business, Quickco, which is one segment they should be concentrating on and I will be contacting the company regarding this. It is a differentiator between them and Lookers and they need to be more competitive. Obviously the major event was the rights issue and to my mind this has had a very positive outcome, not only through reducing the finance costs going forward but also taking care of the pension black hole and therefore reducing the cost of pension contributions going forward. You will see that the CEO is a pensioner and is no-longer part of the pension scheme. Re the remuneration reports I would leave them to the large investors to look at. EPS - Since this is viewed as the main share price driver obviously they need to concentrate on this, but most importantly they need to provide dividend income in order for the shareholders to hold shares rather than just trade them. Quicks - I found this comment on page 31. This will enable them to compete with other car supermarkets. "The Group is continuing to develop its new venture in the used car market, “Quicks”, which has incurred start- up costs and operating losses of £4.8 million in 2011. The Quicks operation has grown to seven sites during the year from four in the prior year. The volume of used cars sold through the Quicks businesses in the year was 6,700. This represents a throughput per site of 950 which is higher than the average in our Evans Halshaw division. During 2012 we will be focussed on ensuring that the Quicks business generates improved performance. This will be achieved through: improved team efficacy to generate greater sales volume and profitability per car per team member increased brand awareness through our internet presence improved stock mix profile and pricing As a consequence of the expected time it will take for the improvements necessary to reach our required standards in the Quicks business, we anticipate the operating costs invested in 2012 to be approximately
Probably as a reaction to all my positive comments LOL
As you all know Jaguar have been doing well although there has been a tailing off in XF sales but I understand that the C-X16 is going to be a dream car that will fly out of the showrooms, so much so that people will be willing to pay to take your place in the queue. Not only will this improve Stratstone's new car sales but the trade-ins will give it even more power in the second hand market. I do not see much of a downside in Pendragon just an upside.
I am a long term holder of this stock with one of the reasons being Trevor Finn, Whilst, like Fred Goodwin, he made a huge take over error (Reg Vardy) he has lost a fortune himself with his now 34m shareholding. He will undoubtedly be acting in the best interests of shareholders and needs the share price to get back over 50p to make good his losses. This is a good well run business and in 3 years I reckon he will reach his target.
Are you still up? I can go to bed now because I was trawling for the info you have provided. Thanks
Have found an error on page 82 para 2.5 Audit fees. They have reported Audit fees of £1,275m (they mean £1,275k). What other errors are there. I have emailed them to advise them.
The Rights Issue documents indicate that there were warrants totalling 49,201,982 at that time. I am not sure what effect the rights issue had but the highest number of warrants would be restricted to circa 104.5m.
I think you will find that it is normal accounting practice to use the weighted average number of shares over the year. The reason for this in the case of a rights issue is that it offsets the fact that the earnings figure is less than it would be with the additional capital raised. It does state that the board consider the EPS figure of 2.3 to be the most accurate. I have calculated that the likely savings in credit costs in 2012 compared to 2011 will be between £26m and £27m (Refinancing costs £17.7m, lower interest costs c.£9m). This will mean we are looking at a PBT of £50m for 2012. Net income after tax of say £10 would be £40m and this would give an EPS of 2.8 for 2012 and a current P/E of 4.2.
I see what you are saying but on the other hand the lower costs from lower debt will have a beneficial effect during 2012 and onwards. Consequently if you are forecasting the same p/e, with eps growing due to lower financing costs you are also forecasting a higher share price. The equity attributable to shareholders is £267.2m which equates to a fair value of 18.8p per share. So both these factors indicate that the shares are undervalued. Even if they stay with "steady as she goes" the cost reductions will provide stronger profits going forward and with dividends reintroduced the share value should rise significantly. Buying in at 12.75 and selling at 16 is not a bad return over 12 months, and any dividend will increase the return.
ODEY is a hedge fund and it is Private Equity companies not Hedge Funds which would move to takeover a company. Hence I see Odey as merely an investor which views Pendragon as having a price lower than its true value which will perform well during 2012 and give Odey a sizeable profit over time. The results for 2011 bear this out and with EPS of 3.7p this gives a yield of 28.46% on a share price of 13p. Consequently the shares are still well undervalued and should more than double in value.
Thanks for your advice. So the results are due tomorrow. As for the analysts I think that they are of the mindset bad year = bad profits but whilst 2012 may be a low GDP growth year it does not mean Pendragon will not do well. Seems to me a lot of people need cars and PDG have positioned themselves well in all parts of the markets. Whilst there are low margins on new cars PDG make their money on second hand trades and after sales so they could do well and will have lower costs due to lower debt.
I cannot understand how the market makers price these shares when during a period of buying trades the price falls. This makes no sense. Certainly I would have thought that since the Rights Issue the banks that mopped up shares have subsequently sold most of them now the price is up circa 30%. Not sure what level the dividend will be but it will be a price driver. Additionally with the reduction in debt I would have thought analysts would be making a buy recommendation with a target price significantly above the current level as the shares are currently undervalued. I would expect them to get to 23p plus within 15 months.