Aston Martin Plans to “Go Public”, the Problem, ‘Britishness’
Aston Martin is mulling a IPO to enter the public markets in search of capital, but the firm’s valuation and brand are no way near Ferrari’s (NYSE:RACE).
The British luxury carmaker and its Italian and Kuwaiti owners may consider floating shares in Y 2018. The time may be right, after years of trouble, Aston Martin could well be on the verge of having an investment story that just might appeal to stock market investors.
The company is 2 years into a strategy to introduce a host of new models by Y 2021.
The Y 2016 results contained a raft of write-downs as it cleaned up the balance sheet, pushing it to a pretax loss. With next year’s numbers, the carmaker should be able to show an OK record of recent revenue and EBITDA growth.
Ferrari NV has fared brilliantly since its IPO, outperforming European stocks.
The market has warmed to the notion that Ferrari has more in common with Hermes’ (PA:HRMS) than Volkswagen AG (OTCMKT:VLKAY) and should be valued be and is being valued on a luxury goods basis.
Ferrari’s stock price implies an enterprise value of 16X forward EBITDA. On that basis, Aston Martin would be worth $3.25-B today (about 23% of RACE). BMW trades at 6.8X and Daimler AG (Mercedes Benz) at 2.4X.
Comparing Ferrari to Aston Martin in any regard is a stretch, it is a very a small carmaker on the road to becoming profitable maybe.
The iconic Maranello outfit is diversified and makes money.
Ferraris have better residual value than Astons even if the British company is closing the gap. So investors are going to be wary of buying into an Aston Martin IPO on a Ferrari-style sales or EBITDA multiple. Investors will want clear evidence that the turnaround is complete and that profit will be predictable in coming years.
Critical to this is the DB11 sportscar, the first of Aston Martin’s new generation of Supercars.
Good order numbers this year will foster confidence that other models will sell. That includes a new luxury SUV (sports utility vehicle). While this is one of the fastest-growing car markets, the company is targeting drivers who have never bought an Aston before.
Aston Martin wants to become a luxury marque capable of shifting more units than Ferrari, generating enough cash to fund R&D, but without compromising its Brand.
That may never be possible.
From the outset it will merit a huge discount to Ferrari. And Aston does not have the iconic F1 racing recognition,
If Aston Martin cho0ses to float its shares it would be odd for London not to play host. Manchester United Plc and now Pret A Manger may prefer New York, but if London cannot land this one, it has a real problem.
Britishness is part of and a problem with Aston’s story.
So, the British car manufacturer announced Friday that it had signed Tom Brady to a multiyear endorsement deal. Mr. Brady will be driving and pitching the DB11, a car that starts at $211,995.00 in the US
“We’re looking for partnerships that make the brand resonate and to make sure people know who we are,” Aston Martin’s North American president Laura Schwab said in an interview. “Tom and Aston Martin are similarly aligned in their path to excellence.”
Still, Tom Brady or not, Aston Martin has a lot to prove, do not expect it ever to catch up to Ferrari.
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