Motorpoint Group Plc (LON:MOTR) have released a trading update this morning essentially confirming they are trading in line with expectations, with the good momentum from H2 of 2017 continuing into Q1 2018. Given the confident tone of the update we are maintaining our forecast assumptions for now however we remain cautious with increasing levels of uncertainty in the economy coupled with dealers likely to increasingly target this market as we progress through the year. We continue to favour the dealers at this juncture offering superior asset backing with more diverse business models on discounted valuations relative to Motorpoint.
Trading update – Motorpoint have confirmed this morning trading in Q1 has been in line with expectations. The group note the momentum built up in H2 of last year has continued into Q1 with continued sales growth and gross margins performing in line with expectations. Recent site openings in Castleford, Oldbury and Sheffield also seem to be progressing well.
Key themes – The group has confirmed sales growth and gross margin performance for Q1 in line with expectations. We forecast a flat gross margin performance for the group for the full year. We note commentary from the wider sector with franchised dealers such as Vertu noting, “a softening of new retail sales volumes and used vehicle margins (particularly in premium franchises), reflecting a downturn in consumer confidence from April onwards”, in their recent update and MMH also highlighting, “ongoing margin pressure” in their most recent trading update.
Forecasts – While Motorpoint Group Plc has clearly delivered a strong performance in H2 2017, which has continued into Q1 of this year, we are maintaining our forecast assumptions for FY18 for now. We continue to carefully monitor how the dealers continue to target this area of the market and with increasing uncertainty around the UK consumer, maintain a cautious view of the sector with forecasts at the low end of consensus across the sector.
Investment view – The company currently trades on a 2018 P/E of 10.0x and an EV/EBIT of 6.7x, which remains at a clear premium to the dealers. We believe the listed dealers offer superior asset backing and a more diversified business model at a time of uncertainty in the wider motor industry.
