logo-loader
Industry & servicesTransport
viewInchcape

Inchcape shares in reverse gear after broker starts coverage of car retailer with a negative call

BarCap said UK earnings were under pressure and Singapore (17% of profits) was at the top of the cycle

car rounding a bend
The company operates in the premium and luxury end of the market

Shares in Inchcape PLC (LON:INCH) fell after Barclays Capital initiated coverage of the vehicle retailer with an ‘underweight’ recommendation.

It has a number of short-, medium- and long-term concerns over the business, which operates in the premium and luxury sectors.

READ: Inchcape boosted by emerging markets, forex and acquisition as Brexit dampens new car demand in UK

In a note entitled Singapore Sting, BarCap said UK earnings were under pressure and Singapore (17% of profits) was at the top of the cycle, while the company also faces currency headwinds.

It also had worries over the £1.6bn of inventory Inchcape carries and the way it is financed, which means a 1% rise in the London base rate has a 3% impact on profits.

E-commerce a threat to traditional car retailers

E-commerce is also a threat, said BarCap, while the near saturation of the Hong Kong market (17% of profits) was flagged up.

Inchcape is a high-quality company that consistently generates mid-high teens ROIC [return on invested capital],” the bank said in a note to clients.

“However, it is a low-growth cyclical that is currently at the top of its cycle in most markets.

“Management is trying to shift the profit pool inorganically to higher-growth markets, but this will take time.”

At midday, the shares were off 12.5p at 712p. BarCap’s price target is 695p.

Quick facts: Inchcape

Price: 640.5 GBX

LSE:INCH
Market: LSE
Market Cap: £2.58 billion
Follow

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Full interview: Commerical momentum at Applied Graphene Materials 'continues...

Applied Graphene Materials PLC's (LON:AGM) Adrian Potts tells Proactive London's Andrew Scott they're seeing positive traction among its customers and are enjoying ongoing momentum in its commercial pipeline. He says a restructuring process they're introducing will re-align the business to...

4 hours, 39 minutes ago

RNS

Director/PDMR Shareholding

2 hours, 1 minute ago

Transaction in Own Shares

1 day, 21 hours ago

Transaction in Own Shares

5 days, 21 hours ago

Director/PDMR Shareholding

5 days, 22 hours ago

Transaction in Own Shares

6 days, 22 hours ago

Transaction in Own Shares

1 week, 1 day ago

Transaction in Own Shares

1 week, 2 days ago

2 min read