Brad Hathaway presented his in-depth investment thesis on Vertu Motors (London: VTU) at European Investing Summit 2015.
Vertu Motors is the 6th-largest auto dealer in the United Kingdom with 114 outlets. While Vertu appears fairly valued on a relative basis with its UK auto dealer peers, this analysis ignores the fact that the company is currently under-earning due to its strategy of acquiring underperforming and loss-making dealerships. 47% of Vertu’s outlets have been acquired within the last 4 years and dealership turnarounds generally take 4 years to implement. As these recent acquisitions mature, Vertu’s sales mix should shift from low-margin new car sales to higher margin used and aftersales, driving total profitability towards peer levels of 2%. With peer level profits, VTU could generate over 10p of EPS, creating potential upside of 75-100%. The stock’s downside is well protected 20% below current levels by a net cash balance sheet, a modest valuation of 12.5x EPS, 0.1x sales and 1.3x book, and a best in class management team.
About the instructor:
Brad Hathaway is the Managing Partner of Far View Capital Management, a New York based investment firm focused on long-term value and special situation investments. Before founding Far View Capital Management, Brad worked at New York investment firms J. Goldman & Co. and Tocqueville Asset Management. Brad graduated from Yale in 2004, where he majored in political science and was a member of the men’s squash team.
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