We had the opportunity to look at Vertu Motors (LON:VTU) bespoke systems capability, which have been built from scratch and evolved since inception of the Group in 2006. We believe this is a powerful part of the investment case and key differentiating factor from its competitors, as such systems collate powerful data that can ultimately deliver enhanced scalability, decision making, focus and compliance. Overall, we remain happy with the long-term investment case, and continue to believe Vertu will emerge as one of the sector winners given its infrastructure, focus on compliance and strong balance sheet. We remain confident in our medium-term intrinsic value of 77p (see note from 9 Oct 2019 )
- Systems teach in: Vertu hosted a Systems Capability teach in yesterday for analysts and investors. The development of bespoke systems has been a feature since inception for Vertu in 2006. We believe this gives the Group enhanced scalability, and has also aided the acquisition integration process, which remains a key part of its growth strategy. The most recent acquisition of four VW dealerships from Sytner was integrated onto the Group’s systems within 36 hours. The internal data collected is used for performance monitoring, focus and compliance, allowing Vertu to maintain its competitive edge in a fragmented market.
- Key themes: There were three key sections to the day encompassing Showroom (Point of Sale, sales process, CRM and compliance), Management Information and Financial Analysis. Showroom highlighted to us the consistent sales process Vertu has, which is something we believe the FCA is monitoring closely at present across the industry. What struck us here was the simplicity for staff to follow, and while covering all of the key issues for compliance, also balanced a relatively seamless journey for the customer. Management Information was a one stop shop for all key information in the business. Again the focus here is compliance, but also to focus on the business drivers, which also gives flexibility to changing market conditions. The final segment was Financial Analytics, which gives quick access from Group wide KPI trends right down to the detail of individual transactions at a single dealership level. This gives management reporting consistency across the Group allowing quick and effective decision making to be made.
- Next catalyst: We anticipate a detailed pre close trading update during the first week of March. Final results are expected on 6th May.
- Investment view: We believe the long-term valuation remains compelling at a 2020E P/E of 7.2x falling to 6.7x in 2021E and an EV/EBITDA of 3.5x falling to 3.2x with a dividend yield approaching 5% backed up by our intrinsic value per share of in excess of 77p and net tangible assets per share of 45p.
