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RESULTS: Inchcape shares slip as economic worries see slowing emerging market growth, but that looks like a good opportunity to buy into this structural growth story
July 31, 2012

Half-year results from Inchcape were stronger than expected, but the motor retailer's shares were marked down 3 per cent after it said the economic worries had seen growth slow in Asia and in emerging markets. But, looking past the short-term concerns, the growth story remains very much intact.

IC TIP: Buy at 376p

After getting off to a flying start this year, underlying trading profits in its emerging market operation - which includes Russia and China - slipped 2.2 per cent to £24.6m as slowing demand led to rising competition and pressure on car prices. However, Inchcape pointed to attractive "structural growth prospects" in these markets as rising wealth boosts car ownership, noting that demand for luxury vehicles in China remains strong.

The supply headwinds caused by last year's tsunami in Japan have also eased, which meant strong performances in Asia and Australasia, while new product launches from Toyota and Lexus should maintain momentum throughout the second half. However, there was little respite in Europe, where like-for-like sales slipped 12.7 per cent. But the UK continues to improve, with new models from Audi and Mercedes driving a near 3 per cent increase in like-for-like sales and lifting retail trading margins to a record 3.2 per cent.

Broker Investec expects underlying pre-tax profits of £249m and EPS of 38.3p this year (from £228m and 34.9p in 2011).

INCHCAPE (INCH)

ORD PRICE:376pMARKET VALUE:£1.74bn
TOUCH:376-377p12-MONTH HIGH:427pLOW: 261p
DIVIDEND YIELD:3.0%PE RATIO:12
NET ASSET VALUE:291p*NET CASH:£228m

Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20112.9312719.63.60
20123.1113420.94.00
% change+6+6+7+11

Ex-div: 8 Aug

Payment: 4 Sep

*Includes intangible assets of £541m, or 117p a share