Aston Martin Laguna Global Holdings (LSE: AML) has glamour, cachet and James Bond on its side, none of which has helped its share price, which has gone into reverse since last autumn’s high profile IPO.
It’s now down 45% in six months, and has dipped slightly after today’s Q1 results. Could this a buying opportunity for long-term investors?Maybe. If you are of an optimistic bent.
Put your foot down
There’s some good news in today’s numbers, with revenues up 6% to £196m in what was a seasonally small quarter. However, adjusted EBITDA fell a whopping 35% to £28m year-on-year, although management pinned this on planned higher costs to support product expansion.
There was a 10% rise in sales of “wholesale units”, (cars to me and you) with sales hitting 1,057 against 963 a year before. This was driven by 30% growth in demand from Asia Pacific, particularly China, with the Americas up 20%. This offset UK and European softness, down 9% and 4%, respectively.
Aston Martin made a gross profit of £83m, in line with last year, but margins dipped 2% to 42%. Net cash from operations rose £37m, as expected, while net debt stood at £590m. Management is optimistic as deliveries are significantly weighted towards the second half.
Investing in Aston Martin was never going to be an easy ride. As Rupert Hargreaves pointed out at the IPO, this is a company that has gone through seven bankruptcies. Luxury car volumes have been falling across the industry, so today’s sales increase is positive, and suggests some resilience to wider automotive trends. A doubling of retail growth in the Americas is a reward for its focus on this key region.
The £1.85bn company isn’t cheap, trading at 21.9 times forward earnings. But City analysts are optimistic, predicting earnings per share growth of 42% across 2019, followed by 90% the following year.
However, these are challenging times, and first half adjusted profits are expected to fall year-on-year, due to the non-repetition of £20m income, more fixed costs, and fewer specials. I wouldn’t rush to buy Aston Martin’s stock today.
Brexit hasn’t helped, witness the drop in UK sales, but travel group TUI (LSE: TUI) has taken an even greater hit, with a fall in holiday bookings as Britons worry about how departing the EU might hit flights, as well as their own prosperity.
The group’s share price has more than halved over the last year, despite a recent rebound after the postponed Brexit deadline prodded people into booking a summer escape.
Today’s half-year results showed a 1.7% rise in turnover to €3.1bn at constant currency, with summer bookings falling just 3%, which is pretty good in the circumstances, while the average selling price actually rose 1%. Overall it falls into the ‘could have been worse’ category.
As well as Brexit, the group has also been hit by the grounding of Boeing 737 MAX aircraft, last summer’s heatwave (which reduced last-minute bookings), and overcapacity in Spain.
However, TUI is benefiting from its integrated model, with its booming Cruise and Destinations activities offsetting declines in Markets & Airlines.
Earnings forecasts look bumpy but this is reflected in a valuation of just 7.1 times forward earnings. The current yield is a mighty 8.1%, covered 1.6 times by earnings. Royston Wild has previously named it a tasty proposition for income seekers. It may not be smooth sailing, though.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.