S&U Plc

S&U Plc (LON: SUS) is a United Kingdom-based company which provides credit facility and financing of motorised vehicles. The company is gradually making its presence felt in the property market.

On 24^th March 2020, the company will announce its full-year results. 

Trading Statement (as on 11th February 2020)
On 11^th February 2020, S&U announced a trading statement for the period from its trading update of 10 December 2019 to the company's year-end on 31 January 2020. In the current period, the company has seen an increase in transactions in both businesses. The company expects that the full-year results will be in line with the management’s anticipation. They also provide a strong platform for further growth next year. The used car market is on-track. During 2019, the January's Motor Finance magazine stated a rise of 6.4% in overall used car prices. In the current financial year, the company has more than 23,300 new agreements in Advantage Motor Finance business, an increase of 11% against the previous year. In Aspen Bridging business, the company continues to make progress. While some borrower exits are still thicker than expected, the level of repayments comprising late-stage repayments has increased recently, resulting in 15 million pounds being repaid in the final quarter of 2019. In the current period, the company’s borrowings decreased from 132 million pounds to just under 118 million pounds. The consistency and sustainability of the group's earnings justify a surge in the second interim dividend per ordinary share this year to 36 pence (2019: 35 pence).  This will be paid on 13th March 2020 to shareholders. This reflects that the first two dividends payable this year will be 70 pence, a 4.5% increase on a year-ago period.

Share Price Performance

Daily Chart as of March 18^th, 2020, before the market close (Source: Thomson Reuters)

S&U Plc shares were trading at GBX 1,700.175 at the time of writing before the market close (at 1:16 PM GMT) on 18^th March 2020 and down by 5.02% versus the previous day closing price. Stock's 52 weeks High is GBX 2,500.00 and Low is GBX 1,650.00.

Valuation Methodology


Conclusion
Despite the challenges faced due to geopolitical uncertainty, the company has shown decent segmental performance for the period. The company had delivered growth in top-line and bottom-line performance for the six months ended 31 July 2019. The company's expectations for the year 2019 looks promising. The demand for the Advantage's motor finance remained strong and was ahead of the last year’s data. As per the trading statement, the company provide a strong platform for further growth next year.

Over the course of 3 years (FY16 - FY19), the company’s revenue surged from GBP 45.18 million in FY16 to GBP 89.22 million in FY19. Compounded annual growth rate (CAGR) stood at 25.46 per cent.

Based on the decent prospects and supported by valuation done using the above method, we have given a "Speculative Buy" recommendation at the current price of GBX 1,650 (as on 18^th March 2020, before the market close at 3:00 PM GMT) based on 7.65x NTM Price/Earnings multiple (approx.) on FY20E earnings per share (approx.).

Marshall Motor Holdings Plc

Marshall Motor Holdings Plc (LON: MMH) is involved in the retailing passenger cars and commercial vehicles.

Financial Highlights – Financial Year 2019 (31^st December 2019, GBP, million)

(Source: Annual Report, Company Website)
 
For the financial year ending 31^st December 2019, the reported revenue increased by 4.1 per cent to GBP 2,276.1 million in FY2019 from GBP 2,186.9 million in FY2018. The revenue on a like-for-like basis increased by 2.2 per cent to GBP 2,209.6 million in FY2019 from GBP 2,161.5 million in FY2018. The underlying operating profit on a like-for-like basis went down by 4.1 per cent to GBP 33.1 million in FY2019 versus GBP 34.5 million in FY2018. The reported operating profit went down by 6.7 per cent to GBP 32 million in FY2019 versus GBP 34.3 million in FY2018. The underlying PBT (profit before tax) decreased by 10.8 per cent from GBP 24.7 million in FY2018 to GBP 22.1 million in FY2019. The reported PBT increased by 8.9 per cent to GBP 19.6 million in FY2019 from GBP 18 million in FY2018. The reported earnings per share stood at 19.9 pence in FY2019 versus 17.2 pence in FY2018, reflecting an increase of 15.7 per cent. The dividend per share stood at 8.54 pence in the financial year 2019.

Share Price Performance

Daily Chart as of March 18^th, 2020, before the market close (Source: Thomson Reuters)

Marshall Motor Holdings Plc shares were trading at GBX 110.00 at the time of writing before the market close (at 2:32 PM GMT) on 18^th March 2020 and down by 10.20% versus the previous day closing price. Stock's 52 weeks High is GBX 178.00 and Low is GBX 110.00.

Valuation Methodology


Conclusion
Brexit continues to weigh on the business prospects, and the SMMT (Society of Motor Manufacturers and Traders) is forecasting a further modest fall in the new car sales in 2020. The group’sorder book for the March plate-change period remained encouraging with the unchanged outlook for full-Year. The group’s long-standing strategy of associating with the right brands and at the right locations has helped them to remain well-positioned to get the maximum benefit from future growth. With the outbreak of COVID-19, the company is in preparation of contingency plans to prevent its dealerships.

Over the course of 3 years (FY16 - FY19), the company’s revenue surged from GBP 1,860.10 million in FY16 to GBP 2,276.10 million in FY19. Compounded annual growth rate (CAGR) stood at 6.96 per cent.

Based on the decent growth prospects of the company and the valuation done using the above method, we have given a “Speculative Buy” recommendation at the current price of GBX 110.00 (as on 18^th March 2020, before the market close at 12:08 PM GMT) with high single-digit upside potential based on 6.20x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
*All forecasted figures and peer’s information have been taken from Thomson Reuters. 

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