AML - Stock Market Listing

[Jon39]

The Sunday Telegraph today contains an article about AML employees who bought shares in the recent IPO.

'Workers were invited to buy ­between £250 and £10,000 of shares in Aston, and the company said 40pc of 2,200 shop floor staff put their own cash in.'

There were a few clues posted on here some time ago about; the pre-IPO hype; high valuation; R&D moved to the balance sheet; initial historic PE ratio 55.4.

Unfortunately, 880 people must have regarded an invitation from their employer to be more enticing, than a few warning comments on this forum.

[Jon39]

Rob.

I just feel an amount of disappointment for the employees, who perhaps were making their very first equity investment, and have now experienced a significant paper loss. I know that a bad first experience, can put some people off investment for good.

RobDown said:

Maybe the employees and hundreds of institutional investors (who are more than capable of doing valuations more sophisticated than a current year PE) just have more faith in the company than you Jon?

Just wondering aloud

( Think you meant previous year PE. )

Yes, historic PE is of course only one of many measures, but I don't think many here are too interested in the intricacies of company valuations. You will of course know, that there was not an official forecast for full year 2018, which did surprise me, because there were so few months remaining before the year end.

Hopefully 2019 and 2020 will be big growth years for AML, and that should justify market values.

In the IPO, institutional investors did pay just over £1,000,000,000, for something which some of us said was overvalued.
Only three weeks later (in theory), they could have saved themselves (or their clients) £200 million.

The point which I am making, is not to do with 'faith in the Company', it is only that the initial valuation always looked too high, notwithstanding that the institutions did agree to pay that figure.

Edited by Jon39 on Sunday 21st October 19:05

[Jon39]

jonby said:

Haven't clocked the aston share price for a while and I know markets are volatile right now, but wow.....

https://www.londonstockexchange.com/exchange/price...

£12.34 today

Aston Martin Lagonda Global Holdings plc., is a Company which at present is very difficult to value. The stock market is reflecting many different opinions.

So far, some people have 'put their money on the table', and have said the Company is worth £4,366,255,344.
Others say, £2,780,495,244.

IMHO, I don't think anyone will have a clearer understanding, until the DBX is in production.

[Jon39]

Perhaps of interest.
Some non-financial extracts about future models, from the Preliminary Results.

- Convertible version of DBS Superleggera in 2019 .

- Convertible version of Vantage in 2020.

- The first production trial of the DBX will commence in Q2 2019, with full production starting in H1 2020.

[Jon39]

If any of you want to read the 2018 Annual Report & Accounts, it is now available.

https://www.astonmartinlagonda.com/investors/annua...

[Jon39]

Is it right that a City analyst can reduce the market value of AML by nearly £200 million in one day, simply by issuing a client recommendation?
Closing price 936p (down 8%).

What makes me cross is that the same firm (a giant European bank) issued a 'buy' recommendation in November 2018, suggesting the share price would reach 2000p, and just seven weeks ago, they issued a confirmation of their previous buy recommendation.

I wonder what their clients think, now that their 'buy' share price target of 2000p seven weeks ago, has suddenly been changed to 'hold' target of 1000p?

Nothing appears to have changed to the business since (their recommendation on) 19th February, but it seems to have occurred to the bank that, ' customer demand for the groups cars will be hit by wider market volatility, making it more similar to premium marques like BMW, than a true luxury brand' ...

Many of us will remember, that is exactly what happened during the 2008 recession. It was not something new seven weeks ago.

[Jon39]

Bobajobbob said:

Deutsche bank is a busted flush and their analysts are .....

I think the lock-in period for the original (pre-IPO) investors ends this month.
Do you know which date, and is it thought that they might want to reduce their current holdings?

[Jon39]

PantsFire said:

Google 'Deutsche Bank' with the word 'scandal', 'investigation', 'fine', 'settlement', 'Mexican drug cartel', or ... well, you get the idea. I wouldn't trust their analyst as far as I could throw them.

Are 'Chinese Walls' (did they stem from the stock market 'big bang' days) just a marketing ploy?
It has been suggested earlier, that analyst recommendations can be linked to the same firm's own stock positions.

I had been under the impression, when seeing any analyst completely change their recommendation within a short time, that it was ineptitude.
Had never dreamt it could be dishonesty.

[Jon39]

Thank you Bobajobbob.
One aspect which puzzles me is this.

The original investors sold part of their holdings at let us call it, a generous price. I am not sure if they all sold in equal proportions, but assuming that to keep it simple, 25% achieved the higher price, but now their remaining 75% is only worth roughly half that value.

If a house is worth say £1m, why hype up the marketing, then sell 25% of it at £1.5m (unit) and the rest at £750,000?
In total you receive less than £1m.

If there was pre-float hype, is it therefore possible that the IPO investors were not the only victims?

[Jon39]

hornbaek said:

..... the equity research departments of the banks have Chinese walls to the Corporate Finance side of the banks. These Chinese walls are taken seriously as big fines will be imposed to banks if they are broken. The only one that has consistently talked up the price is Andy Palmer. He has simply made it too difficult for himself and now has to live with the consequences.

No - i think the demise of the AML stock is down to a number of factors:
1 - AML has not delivered after the listing
2 - A Palmer has not be able to convince shareholders about his "luxury" position and "recession proof model"
3 - the lock-up is expiring putting further downward pressure on the stock

Thank you. Interesting debate, keep it going everyone.

I did wonder at the time, whether AP might have been encouraged (to talk up the price), because it was so repeatedly obvious.
Glad to hear that the Chinese wall system is still working. Bobajobbob made me think it might be a thing of the past. A very important aspect to help make matters fair for (outsider) private investors.

I have numbered your factors hornbaek.

Items 2 and 3, I agree with. The pre-IPO distraction, of flying cars, private submarines and flats in Florida, I am sure were ignored by serious investors during their appraisal of the (car manufacturing) Company. As for a recession proof model, we only have to look back to the last economic downturn.

Your item 1, we disagree on that point. What extra Company performance, have investors been expecting since the IPO?
As far as I understand, the considerable IPO costs were bound to be in the 2018 accounts, so that was already known. The sequence of new models going on sale has been known for a long time. Perhaps some investors thought the timescale of model introductions was shorter, but AP has been much more open about what is coming and when, than is usual in the car industry. With so many new models coming, obviously development spending is enormous, before any customer (dealer) revenue is received. Certain special model deposits have been a significant contribution, but that cannot be a regular continuing feature. The targets of 7,000 sports cars and 7,000 other vehicles were already known, and of course relies heavily on the success of the SUV, which was also known.

Everything seems to have been known by investors including the debt level, so I do not understand why you say AML has not delivered after the listing. The major relevant unknown of course, is when the economic cycle will change thereby reducing revenue, but that is always a factor present for most businesses.

Edited by Jon39 on Tuesday 9th April 12:16

[Jon39]

To Rob Down.

You kindly offered to answer technical questions earlier today Rob, although your post has gone now.

What are the various estimated figures, for 2019 forecast earnings per share.
Only interested in the figures, not who made the forecasts.

Thank you.

[Jon39]

hornbaek said:

..... The CEO has a central role in this, because he is going to live with his new investors after the listing. His old shareholders are out of the door, so his loyalty should be towards the new shareholders that largely bought into his strategy.

I don't think that is the case in this particular instance. The 'old' shareholders only sold part of their holdings.
They probably (need to check whether correct) continue to still be the majority owners.

'Prior to and since Admission, the Company has two groups of Controlling Shareholders namely, the Adeem/Primewagon Controlling Shareholder Group and the Investindustrial Controlling Shareholder Group. The relationship between the Company and each of these Controlling Shareholder Groups is governed by two separate Relationship Agreements, each executed on 20 September 2018.'

As Investindustrial I believe are a private equity group (which usually tend to be medium term holders), at the time of the flotation price announcement, I was surprised that they were not using that opportunity to sell their entire stake.

Edited by Jon39 on Tuesday 9th April 22:50

[Jon39]

hornbaek said:

In the past I have been accused of being overly pessimistic/negative on AML, so i have tried to stay as neutral as possible explaining the process - so thank you for your comment.

I had exactly the same treatment, particularly when I dared to reveal my surprise at the flotation price. Simply expressing an opinion, but was then told by several people, that conventional investment fundamentals do not apply to AML.

I have found this. It does not copy perfectly, but hopefully clear enough.

'As at 31 December 2018, the Company had been notified under Rule 5 of the Disclosure and Transparency Rules of the following major interests in its issued ordinary share capital:

Adeem/Primewagon Controlling Shareholder Group
Adeem Automotive Manufacturing Company Limited 15,979,676 = 7.01%
Asmar Limited 19,398,018 = 8.51%
Primewagon (U.K.) Limited 6,696,050 = 2.94%
Primewagon (Jersey) Limited 36,449,182 = 15.99%
Stehwaz Automotive Jersey Limited2 3,588,726 = 1.6%
Total 82,111,652 = 36.05%

Investindustrial Controlling Shareholder Group
Prestige Motor Holdings S. A. 55,050,323 = 24.14%
Preferred Prestige Motor Holdings S. A. 15,564,558 = 6.83%
Total 70,614,881 = 30.97%

Daimler AG 9,529,739 = 4.18%
OppenheimerFunds, Inc. 13,664,959 = 5.99%

[Jon39]

RobDown said:

Consensus EPS:

2019 39.4p
2020 79.5p
2021 108.7
2022 123.4p

That’s from Bloomberg. Major caveat is that, understandably, the further out you go the less reliable it is

Valuations for these types of companies tend to be done more on EBITDA (think of it as a proxy for cash flow)

2019 - £304m
2020 - £445m
2021 - £553m
2022 - £649m

Thank you for the figures, Rob.
The significant 102% forecast EPS growth in 2020, obviously represents DBX sales.

EBITDA has certainly become very popular during recent years, but I still prefer the 'how much is left in the purse at the end of the month' basis. Just feel it is more realistic, rather than a figure before the payment of further deductions. Cannot base dividend cover on EBITDA.

[Jon39]

tigerkoi said:

What’s the general sentiment on actual new Vantages sold (and also U.K. sales vs abroad)?Apologies if already covered.

You raise a very important point tigerkoi, because the lowest price model (relative) should be the main driver of core model sales.
We have to be careful what we say on here about the new Vantage though. I will only say what is publicly available, which anyone can find out for themselves.

I have no knowledge about whether new registration are ublicly available in your own country, but I have enjoyed watching the very enthusiastic Alek Ackerman on video.

In the USA at present, there are now 177 new Vantages advertised for sale by dealers. It is of course a very big country, so perhaps that is a normal stock level. In the UK retail customers tend to spec. their own new cars, but it does seem to be the convention in some other countries, that dealers choose the spec. then when built offer those cars for sale.

In the UK, monthly Aston Martin sales figures no longer appear on the SMMT new registration releases (since December 2018).

Also in the UK, the DVLA are very slow at present in publishing their quarterly new registration figures. They do show individual models. Their last available figures are to 30th September 2018. When I last looked, there is nothing yet for 31st December 2018.

Therefore in answer to your question, we may not have any UK facts for a while.

AMLGH plc are going to publish quarterly trading reports (many PLCs only do half year), so they might provide some information, although unlikely to be in great detail (Q1 due 15th May 2019).

Remember that AML sales are wholesale, so with each new model there will be an initial sales boost as dealers buy cars as demonstrators and for showroom display.

[Jon39]

RL17 said:

hornbaek said:

..... The rumours now voiced by some analysts, that AML might need a rights issue to shore up the finances is another downward pressure on the stock and also something that could have been better prepared by the initial investors leaving something on the table .....

Can't see that only selling 25% or so max (based on above figures) is leaving nothing on the table.

I assume that any concerns amongst investors about an equity rights issue will have now diminished, because an additional $190m debt has been taken on.

1st April 2019
'Aston Martin Lagonda Global Holdings plc ("Aston Martin Lagonda" and together with its affiliates, the "Group") today announced that its subsidiary Aston Martin Capital Holdings Limited has privately placed $190,000,000 aggregate principal amount of 6.50% senior secured notes due 2022.'


It was years ago that I was involved with company flotations, but the phrase 'leaving something on the table', then meant trying to price an IPO, so that the new shares would begin trading perhaps up around 10% on the first day. When that happened, it was considered by all participants to be an encouraging start and the further initial share trading tended to be more likely to stay above the float price. Obviously the sellers had to make a sacrifice, but if they had only part sold, there was the possibility of benefit later.

[Jon39]

tigerkoi said:

Didn’t AML issue £55m of senior debt, also due for 2022, back in 2017?

Extract from page 186 of the 2018 Annual Report.
Bed time reading for you (although I know it is not yet bed time in Canada).

---

Non-Current Borrowings

In June 2011, the Group issued £304m 9.25% Senior Secured Notes repayable in July 2018. These notes were repaid in April 2017 when the Group issued $400m 6.5% Senior Secured Notes and £230m 5.75% Senior Secured Noted, both of which mature in April 2022. In December 2017 the Group issued a further £55m of 5.75% Senior Secured Notes which also mature in April 2022.

The movement in carrying value of the Senior Secured Notes from 2017 to 2018 includes £2.3m (2017: £2.0m) amortisation of previously capitalised professional fees.

The combined sterling equivalent value of the Senior Secured Notes at 31 December 2018 is £590.9m (2017: £570.2m).

As described in accounting policies (see note 2), borrowings are initially recognised at fair value less attributable transaction costs. Subject to initial recognition, borrowings are stated at amortised cost with any difference between cost and redemption value being
recognised in the Statement of Comprehensive Income over the period of the borrowings on an effective interest basis.

The Senior Secured Notes above are secured by fixed and floating charges over certain assets of the Group.

In March 2014 the Group issued $165m of 10.25% Senior Subordinated PIK Notes which were repayable in July 2018. These notes were repaid in April 2017.

In 2018 the Group entered into a fixed rate loan to finance the construction of the paint shop at the new St Athan manufacturing facility. The loan matures on 31 March 2022. The quarterly repayments on the loan include an element of capital repayment and interest charge. The final payment on 31 March 2022 includes an increased capital repayment of £6.3m. At 31 December 2018 the amount included in non-current borrowings is £12.4m.

In February 2017 the Group obtained a 5% unsecured loan of Yen 200m which is repayable in January 2020 to finance the construction of a brand centre in Tokyo. At the closing exchange rate the loan is valued at £1.4m (31 December 2017: £1.3m).

In both April 2015 and April 2016, the Group issued £100.0m of Preference Shares which were redeemable in April 2025. As part of the listing of the Company’s ordinary shares on the London Stock Exchange, on 3 October 2018, the preference shares, together with the share warrants attached to them, were converted into ordinary shares of 0.00904p each. See note 28 for details of the capital reorganisation completed in 2018.

No borrowing costs have been capitalised during the year ended 31 December 2018 (31 December 2017: £12.1m). The borrowing costs capitalised in 2017 relate to the $400m of 6.5% Senior Secured Notes and £285m of 5.75% Senior Secured Notes raised in 2017.

---

[Jon39]

Yes I agree (RL17), the world of equity analysts seems very strange on occasions.

I often wonder whether clients do act upon the equity recommendations. I can remember an instance where Goldman Sachs, being the only analyst out of a dozen, gave a Sell recommendation. The other eleven were all Strong Buy. After about nine months and a 30% share price increase, Goldman then issued a Buy rating. It would have been costly for their clients who followed that advice.

Obviously not all of our investment decisions can turn out to be correct, hence diversification to spread the overall risk, but when an analyst publishes a recommendation to their clients, and then after a short time completely changes it, you would think they would begin with an apology. Oh no, they just list supposed reasons why the future business profitability is going to be affected.

In the instance which you have outlined, others have already pointed out here, that all the reasons given were nonsense, because the information had already been publicly known months earlier.

Perhaps we have an Aston Martin owning analyst here, who can explain their profession to us.

This morning at one point, AML was trading at 911p. You would think there would be some courtesy shown, and do those trades at 910p or 912p. That reminds me, Porsche now sell far more SUVs than sports cars. If Aston Martin can achieve that with large profits, then we might see a remarkable share price increase.

Edited by Jon39 on Thursday 11th April 13:31

[Jon39]

After a long wait, the DVLA have now published their new registration figures for the 4th quarter of 2018.
Remember this is UK only.

DB11 AMR V12 Auto = 6
DB11 V12 Auto = 15
DB11 V8 Auto = 28
DB11 V8 Volante Auto = 43
DB11 total = 92

DB9 = 4

DBS Superleggera V12 Auto = 46

Vantage V8 Auto = 107


( Perhaps the DB9s have been brought to the UK from other countries. It must be unlikely that they remained in stock for such a long time. )

Edited by Jon39 on Thursday 11th April 19:31

[Jon39]

Total figures for the other quarters could be combined with these, but 2018 was probably not really representative.
Customer deliveries of two new models only began part of the way though the year, and prior to their release, I think there was an interval following the end of the previous models production.

Although the UK is still the biggest market, 70% is about the proportion of cars exported.

Edited by Jon39 on Thursday 11th April 19:50