AML - Stock Market Listing

[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

[jonby]

Jon39 said:

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

I agree with your observations on point 1 - there was always going to be a tricky 2yrish period to navigate until DBX/lagonda/mid engined cars went on sale - the question is will those cars sell as well as is hoped for, but we are surely at least a year away from beginning to know whether they will ? That is surely key to the whole business model

[hornbaek]

Shareprice development is not a science. It is clear that the „perception“ that AML has not delivered on its promises is well and alive.
It is clear that the selling shareholders have an interest in having an as high price as possible - at the end of the day they are sellers. In order to get the mandate to list the shares, the banks will come up with their valuation of what they think the business is worth. The one that comes with the highest valuation gets the mandate. (That is a bit like the estate agent pitching for a house sale mandate). However, the real client of the investment bank is not AML in this case, but the institutions they sell the shares to. So the banks have an interest to maintain a healthy development of the share price as the institution are their recurring customers not AML.

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. In the case where the CEO is given a large share option scheme he actually has a bit of a conflict and my personal belief regarding AML, is that Andy Palmer has misjudged this due to inexperience. He could not sell any shares in the offering anyway (lock up), so he should have been rather conservative about prospects and then once the float is off and away he should have a bit up his sleeve to make life easier for himself so that he can „over perform“ on his promise 6 or 12 months later. Clearly he accepted the valuation demanded by his investors and is now the one who has to take the wrath of investors (fairly or unfairly). I don’t envy him his job because he will have to pull something really unexpected out of the hat in order to regain the trust of shareholders.

[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.

[David W.]

To Hornbaek

“Clearly he accepted the valuation demanded by his investors and is now the one who has to take the wrath of investors (fairly or unfairly). I don’t envy him his job because he will have to pull something really unexpected out of the hat in order to regain the trust of shareholders.”

And staff who invested (encouraged or not?).

Edited by David W. on Tuesday 9th April 23:37

[RobDown]

Hi Jon, I took it down as after consideration I thought it might not be of interest.

I’ll dig out the consensus for you when back into work tomorrow morning

[tigerkoi]

hornbaek said:

Shareprice development is not a science. It is clear that the „perception“ that AML has not delivered on its promises is well and alive.
It is clear that the selling shareholders have an interest in having an as high price as possible - at the end of the day they are sellers. In order to get the mandate to list the shares, the banks will come up with their valuation of what they think the business is worth. The one that comes with the highest valuation gets the mandate. (That is a bit like the estate agent pitching for a house sale mandate). However, the real client of the investment bank is not AML in this case, but the institutions they sell the shares to. So the banks have an interest to maintain a healthy development of the share price as the institution are their recurring customers not AML.

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. In the case where the CEO is given a large share option scheme he actually has a bit of a conflict and my personal belief regarding AML, is that Andy Palmer has misjudged this due to inexperience. He could not sell any shares in the offering anyway (lock up), so he should have been rather conservative about prospects and then once the float is off and away he should have a bit up his sleeve to make life easier for himself so that he can „over perform“ on his promise 6 or 12 months later. Clearly he accepted the valuation demanded by his investors and is now the one who has to take the wrath of investors (fairly or unfairly). I don’t envy him his job because he will have to pull something really unexpected out of the hat in order to regain the trust of shareholders.

Excellent post. On this and your previous one explaining the book building I couldn’t have written it better - good to read when someone knows what they’re talking about.

In the whole affair, Palmer is central to what’s happened: the point about his relative inexperience as a CEO, least of all one leading a company into the IPO light, is acute.

[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%

[RL17]

I'd have said the main shareholders pre-IPO were driving the project with the IPO aim and a target return on the shares sold.

Market dived soon after float and if had been timed for a few weeks later it would have got shelved. AP's job was to get AML into the position where it could be floated.

Valuation is what people are prepared to pay for the company based on future growth they predict and their views on future prospects. Lots of bad news from German and UK makes building up plus loads of changes coming for transformation from ICE to hybrid and EVs etc.

It's the view of the future that keeps changing and with lots of issues of trade with China/Brexit and Chinese/major market growth etc and in this case how various companies performed in last downturn and doubts whether they have become a more resilient luxury brand.

Can't see AML have done much wrong - loads of great vehicles coming on stream - must be in a better position than in 2008/2009. Timing of DBX launch compared to health of luxury car market could be key. Don't blame AP for high initial price.

[hornbaek]

Sorry - don’t buy that argument. Whereas AML has tanked almost 50% Ferrari has fallen 2% during the same period. The factors that you list were all blatantly obvious even before the listing - so nothing new there. It comes down to the perception that AML was sold on a story that so far has not proven to represent reality. I am not accusing anyone, as investors make up their own mind, but A Palmers performance in subsequent interviews by the financial press (especially the one in Geneva) points a picture of someone who is out of his depth. It is true, that Invest Industrial only sold part of their holding - but they sold as much as they could get away with. How much they sell is not their decision, but the issuing banks advice on how much the market can absorb. 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 or at least leaving some room to raise capital and not only sell shares. End of conversation from my side.

[RobDown]

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

RL is correct above in that the timing and subsequent macro developments have been unfortunate. However there are equally a lot of institutional investors upset at the “triumphalist” nature of the last management presentation too; they felt It should have been a little more “humble” given the share price reaction and the losses they were wearing

[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.

[tigerkoi]

Jon39 said:

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.

EBITDA measurement has taken a hammering in recent times, especially since the Crash and the greater significance in understanding in particular the Banks’ performance and almost premium placed on revenue & expenses interest. However in AMLs case it’s still worthwhile. After all, judging performance of AML stock you want to do some straight measurement with the likes of Ferrari. Judging performance on cars sold today is a different gig from say, viewing RWAs that could be either an albatross or a pearl many tomorrows into the future.

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

[RL17]

hornbaek said:

Sorry - don’t buy that argument. Whereas AML has tanked almost 50% Ferrari has fallen 2% during the same period. The factors that you list were all blatantly obvious even before the listing - so nothing new there. It comes down to the perception that AML was sold on a story that so far has not proven to represent reality. I am not accusing anyone, as investors make up their own mind, but A Palmers performance in subsequent interviews by the financial press (especially the one in Geneva) points a picture of someone who is out of his depth. It is true, that Invest Industrial only sold part of their holding - but they sold as much as they could get away with. How much they sell is not their decision, but the issuing banks advice on how much the market can absorb. 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 or at least leaving some room to raise capital and not only sell shares. End of conversation from my side.

Market sentiment is fickle - lemmings are fine most of the time and then............

China market/Brexit/JLR/German auto makers still not recovering that much after WLTP issues - AML's success depends on where teh curve is when DBX launches

Ferrari shares have not been stable - up 40% of so in last 4 months after a dip late last year.

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

Much better to have someone capable of building great cars driving the business that the usual FTSE/FTSE 250 execs who are always overly pessimistic as they only care about gradual long term growth to satisfy their LTIP targets and only care about short medium term targets.

[BamfordMike]

The recent contributions to this thread are awesome. I guess like me, probably most folk on here know very little about the markets and its workings, so to read a realist / person in the know perspective is both fascinating and informative. Thanks

[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.

[tigerkoi]

Jon39 said:

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.

Thanks Jon, much appreciated.
I’ve read a good enough part of the forum to know that the new Vantage debate has been a vibrant one so won’t want to open it up ()except to say that, I’ve barely seen any on them road at all! Of course empirical info is bested by hard facts but I suppose we need to wait until the Q1 results for more accuracy, as you say.

With regards to the US and the large-ish number on for resale, all I will add is this: in my limited experience, your average US premium buyer is far more critical over the interior of a car and their needs from that. There has been criticism that although it’s a fine car, performance wise, the cabin doesn’t always do it for many buyers. Personally I think the lift and drop from Mercedes exercise could have been better handled and reimagined.

I’m going to have a look at the US numbers more closely. The location of the sales will be quite telling. I’d expect a large spread across states like NY, California and Florida, but next to nothing in say Oklahoma or Wyoming. And because of that you can adjudge where the money is and whether or not AM is making those premium inroads in the places it’s business case requires it to do so.

Thanks again.

[tigerkoi]

BamfordMike said:

The recent contributions to this thread are awesome. I guess like me, probably most folk on here know very little about the markets and its workings, so to read a realist / person in the know perspective is both fascinating and informative. Thanks

Agreed!

[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.