Aston Martin Lagonda Global Holdings Plc

Aston Martin Lagonda Global Holdings Plc (LON: AML) is a manufacturer of luxury cars. It operates through two business divisions – Aston Martin and Lagonda.

The Company will release Q3 FY2020 results on 12 November 2020.

Investment Highlights - Aston Martin Lagonda Global Holdings – Avoid at GBX 63.66

• The Company made progress on execution in Q3 FY2020, while operations remained impacted by the uncertainties created by the covid-19.
• In the last one year, the Company delivered a negative return of ~ 57.14% and delivered significantly lower returns compared to the benchmark Index (FTSE-250 Index).
• As per valuation metrics, EV/Sales, EV/EBITDA & Price/Cash Flow multiples of the Aston Martin Lagonda Global Holdings Plc are currently higher as compared to the corresponding multiples of the Automobile & Auto Parts industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is in the overbought zone and supporting downward movement (around 79 level), which means the stock price could decline in the short term.

Key Risks

• The Covid-19 pandemic had a material impact over the demand and supply of the Company, which widened the operating losses in H1 FY20.
• The trading environment is anticipated to remain challenging during the entire FY2020, and the Company is unable to predict demand trends until the business starts to operate normally at full capacity.

Recent News

On 28 October 2020, Aston Martin Lagonda Global Holdings provided the results of Conditional Capital Raise announced on 27 October 2020. The Capital Raise include 250,000,000 new shares at 50 pence will raise £125 million of gross proceeds. The new capital raise represent around 13.7% of existing shares.

On 27 October 2020, Aston Martin Lagonda Global Holdings announced that its subsidiary (Aston Martin Capital Holdings Limited) had launched senior secured notes of £840 million due in 2025.

On 27 October 2020, Aston Martin Lagonda Global Holdings announced the expansion and enhancement of technology agreement signed with Mercedes-Benz AG. As per the agreement, the Company will have access to advanced technologies in exchange for new shares.

Trading Update for Q3 FY2020 (released on 27 October 2020)

• In the Q3 FY2020, the Company made progress on execution and re-opened Gaydon in August end started DBX production.
• The revenue in Q3 declined to £124 million, with negative adjusted EBITDA of £29 million.
• The cash balance as on 30 September 2020 increased with lower net debt.
• The Company managed to reduce GT/Dealer sports stock by >1,400, with reduction of 567-unit in Q3.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

Due to the uncertain trading environment caused by the covid-19 crisis, the Company experienced a significant decline in sales in both retail and wholesale divisions and reported a negative adjusted EBITDA. The trading environment remained challenging in many markets, and the pace of consumer recovery is still unpredictable. Despite the challenging trading, the Company is progressing well on execution and is also expecting additional cost savings. The partnership with Mercedes-Benz AG will provide access to advanced technologies. The recent funding will help AML in supporting growth ambitions and strengthens financial resilience. The stock made a 52-week low and high of GBX 27.50 and GBX 204.14, respectively.

Based on the headwinds faced by the Group, we have given an "Avoid" recommendation for  Aston Martin Lagonda Global Holdings Plc at the current price of GBX 63.66 (as on 28 October 2020, before the market close at 8:20 AM GMT), while we watch for results of the cost efficiencies and effective utilisation of raised funds).

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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