Cambria Automobiles (LON:CAMB) has announced this morning the successful acquisition of one Aston Martin franchise and one Rolls-Royce Motor Cars franchise in Edinburgh from the administrator of Leven Cars Group Limited. The total cash consideration, which includes one freehold and one leasehold property along with certain fixed assets, is £1.6m and this will be funded from the Group’s existing resources. We update forecasts to reflect this, with an increase in 2020E revenue of c.2.0% but no impact to earnings. In 2021E we assume an additional £30m of revenue and a 1.6% increase to adj. PBT forecasts (1.6% at the EPS level). We remain firmly confident in Cambria’s ability to continue to execute and outperform the market as it has in recent years and see this latest acquisition as further evidence of the group’s ability to effectively deploy capital and acquire assets at good value.
- Acquisition: Cambria has acquired of one Aston Martin franchise and one Rolls-Royce Motor Cars franchise in Edinburgh from the administrator of Leven Cars Group Limited. The total cash consideration, which includes one freehold and one leasehold property along with certain fixed assets, is £1.6m and this will be funded from the Group’s existing resources. The consideration includes no goodwill with £1.5m of freehold property and c£0.1m of plant and equipment. The franchises represent the only Aston Martin and Rolls Royce dealership in Scotland and the group’s first Rolls Royce dealership in the portfolio, expanding the High Luxury Segment offering.
- Forecasts: We update forecasts to reflect this, we increase our 2020E revenue forecast by 2.0%, but expect the newly acquired sites to be breakeven in this year and have therefore not changed our earnings expectations. In 2021E, we assume an additional £30m of revenue, delivering an increase of £0.2m to adj. PBT. Net debt, factoring in £1.6m paid for the assets, and our new trading assumptions is £11.7m in 2020E (vs £10.1m previously), going to £14.1m, in 2021E (vs £12.6m previously) and £9.7m in 2022E (vs £8.4m previously)
- Investment view: We remain confident in the Cambria Automobiles story longer term, and believe it remains well positioned to deliver £1bn+ of revenue over the medium term. As we are seeing across the sector at present, near term valuation multiples are depressed, and the current market capitalisation of the Group remains at odds with the >£80m invested freehold asset base. The growth in the High Luxury Segment with the addition of Rolls Royce looks exciting. Cambria trades at a discount on a P/E basis to its direct UK peer group, in a sector that looks oversold.
