Marshall Motor Holdings PLC has delivered strong growth in what remains a challenging conditions, showing good outperformance against the market. We are maintaining our forecasts, with our estimates below consensus ahead of what we anticipate to be a difficult Q1 and March trading period. That said, we do believe the shares offer good long-term value at this juncture and point towards a prospective P/E of less than 8x and EV/EBITDA below 4x, which remains at a discount to the sector. In addition, MMH has a strong balance sheet and a prospective dividend yield in excess of 4%.
Final results: MMH has delivered final results, which are marginally ahead of our forecasts at the adjusted PBT level and +14.4% YOY. Adjusted EPS was +17.6% and 8.8% ahead of our forecast with the effective tax rate coming in at 18.1% vs. 24% assumed in our forecasts. The total dividend for the year at 6.4p was bang in line with our forecast and +16.4% YOY. There was an exceptional profit of £24.1m in these numbers. Net debt at £2.2m was also better than our forecast of £4.9m and considerably lower than the £119.0m position last year, which included both core and leasing debt. Net assets per share stand at 247p per share, with freehold and long leasehold assets at £116.3m.
Key themes: New unit sales were +12.3% as they benefited from the Ridgeway acquisition. LFL new retail units were -2.6% vs. the market -6.8%. LFL fleet unit sales were -13.9% vs. the market -4.7% as it tactically decided to exit low margin business. Used unit sales were +17.1% and +5.2% on a LFL basis, which we believe is very creditable vs. a market -1.1% during the year according to the SMMT. A focus on improving its online presence was key in driving this performance. Aftersales revenues were +20.0% or +2.3% on a LFL basis. Gross margins in this segment improved by 130bps to 46.9% suggesting it continues to perform well.
Forecasts: While the current economic environment remains uncertain, we believe the Group is now better placed to cope with this given its more focused portfolio and strong balance sheet. Current trading is said to be in line with expectations ahead of the key trading period of March, and we are maintaining our below consensus headline forecasts as a result
Valuation: We believe the valuation remains undemanding, trading on a 2018E P/E of 7.5x and an EV/EBITDA of 3.8x, which remains a modest discount to the sector also on close to trough multiples. With a strong balance and significant asset backing coupled with a dividend yield in excess of 4%, we believe MMH looks undervalued particularly within the context of the execution delivered since IPO in 2015.
