Car maker could trade at a material premium to Ferrari based on IPO pricing range
Thursday 27 Sep 2018 Author: Tom Sieber

There are concerns that luxury car brand Aston Martin will be just too expensive when it joins the stock market in early October.

The pricing range of the IPO, offering 25% of the business at between £17.50 and £22.50 per share, implies a valuation at the top end of a little more than £5bn.

The company reported net profit of £77m in 2017 which together with the mooted market cap feeds into a trailing price-to-earnings (PE) ratio of 65-times.

Italian sports car giant Ferrari, which we wrote about in-depth in July, is a good benchmark. Based on its own market cap of $26.5bn and 2017 earnings of $645m, Ferrari currently trades on a PE of 41-times.

Aston Martin undoubtedly has a strong brand, synonymous with the James Bond films, but its track record is hardly unblemished with seven bankruptcies since its inception in 1913.

There are also short and long-term challenges on the horizon for the business. In the short term there is the disruption to the car industry threatened by Brexit and in the long term, the coming electric vehicle revolution.

We feel its growth plan looks too aggressive and that the shares may not be a good long term investment, even if they do jump immediately on listing. (TS)

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