Inchcape

[YeeWo]

As I type Inchcape has fallen circa 11% this morning. No RNS has been released, I can see no justification. Inchcape isn't simply a "car dealer" it's unique amongst the UK plc's in that it operates in 32 different markets and 2 sectors (retailing and distribution). Car Retailing isn't the most sparkling of businesses, but Distribution has wonderful barriers to entry and a consistently high ROCE. At the current SP of circa 545p, which has been paying increasing dividends for 5+ years, is starting to get into HYP territory with a current yield of circa 4.5%.

I have called Investor Relations this morning to seek some comment, Ominously all relevant people are in a meeting all day!

Constructive opinions eagerly sought!

Disc : I've held Inchcape since 2009 and have enjoyed an XIRR of circa 12%.

[Wasron]

I may end up regretting it but I opened a small long position this morning, as they’ve been on the watchlist for a while and the yield became interesting. The lack of any news is a bit of a concern though

Wasron

[monabri]

A comment on the directors/PDMR's buys & sells.

viewtopic.php?f=15&t=14264#p174433

Current visible shorting is zero.

https://shorttracker.co.uk/company/GB00B61TVQ02/

[magsy12]

From Thomson Reuters today at 4.46pm:
"Shares in car dealership Inchcape INCH.L tumbled 13 percent after HSBC analysts slashed their target price on the stock, flagging risks to earnings as new car volumes in the UK and Australia are falling. Inchcape's decline contributed to a 2 percent fall in European auto and suppliers' shares .SXAP after Goldman Sachs warned of a "challenging" quarter for the sector."
I think that this fall overdone and it may be a good time for me to buy in having sold recently at 619.

[YeeWo]

In the end I sold half my Inchcape shares and reinvested the proceeds plus some extra cash in Rio Tinto, higher yield and the business has no debt. In the event that the Inchcape SP is < 550p in Tax Year 19/20 I may very well buy back. Either way I'm comfortable with more RIO and less INCH at the mo.!!

[YeeWo]

In the end I sold half my Inchcape shares and reinvested the proceeds plus some extra cash in Rio Tinto, higher yield and the business has no debt. In the event that the Inchcape SP is < 550p in Tax Year 19/20 I may very well buy back. Either way I'm comfortable with more RIO and less INCH at the mo.!!

I'm reading in the Australian media that Inchcape is negotiating with GM to buy/operate the Holden distribution franchise in Australia. As Inchcape already has a national distribution network for Subaru an additional brand on the scale of Holden may very well enhance the economics of what is already a good business. In the retailing business in Australia it's also rumoured that Trivett Group (22 Premium Dealerships that Inchcape bought in 2013 for £78m) is up for sale. These developments taken together may well mean that Inchcape's Australian earnings may be far higher in five years time than they are today. I've topped up Inchcape today at 581p. GLA!

[YeeWo]

Attended the Inchcape AGM today at Deutsche Bank building in EC2. Good cup of coffee, some free nick-nacks and had a great chat(s) with Rob Walker (Digital Marketing Manager), Stefan Bomhard (CEO) and shook hands with Lord Inchcape himself! Meaty takeaway points/impressions: -

- £200m write-off for UK retail acquisitions was buried in the results today and was brilliantly highlighted by iii investor Phil Clark.
- 90%+ of profit is now generated from Distribution.
- The company was hinting strongly it perceives dark-clouds in the global economy.
- Excellent positions in avant-garde markets such as Ethiopia which is apparently very supportive of FDI.
- Distribution aftersales generate circa 37% of overall distribution profits (e.g. spares for Subaru in Australia).
- Russia is clearly risky but profitable.
- China is unlikely to become a "scale" retail business and the political complexion of the country means distribution contracts are unlikely.
- UK retail sounds sickly, Management aren't clear/sure if this situation is cyclical or structural.
- Distribution is clearly Inchcape's priority, I got the distinct impression chunks of the Retail portfolio would be for sale at a rational price.
- The moves into Central America make sense.
- £100m in buybacks while not a bad thing, is disappointing insofar as nothing more useful is able to be done with the cash.
- Stefan Bombard didn't rule acquiring non-controlling stakes in the right businesses if the right opportunity arose. He cited the nature of the Toyota business in Brunei (he seemed a bit shocked when I referred to "NBT" - North Borneo Trading) which is a JV involving Inchcape and local partners. Clearly I have a rather geeky level of knowledge on the foibles of Inchcape's activities!

Disc : Inchcape is circa 5% of my portfolio, held for 10+ years and (including dividends & a little tinkering) has furnished me with an XIRR of 11+%. Well worth keeping an eye-on IMHO. GLA!

[YeeWo]

The actual impact of COVID-19 is clearly unknowable at this stage.
- Inchcape however announced with yesterday's results that £150m of buybacks is scheduled for 20/21, this should only be a good thing for the SP.
- Stephan Bomhard is leaving for Imperial Brands.
- I added yesterday at 563p the same no. of stocks I sold on 13 Jan 20 at 697p.