Aston Martin Lagonda (lon:aml)
Aston Martin – Buy Only If You Believe Stroll et. al. Will Support It?

Aston Martin Lagonda Financials

ItemCurrent PeriodPrevious Period
Period12 Months12 Months
Adjusted Earnings
Adjusted EBITDA£134m£247m
Statutory Profit(£104m)(£57m)
Adjusted Profit
Total Debt
Net Debt£876m£560m

Commentary History
No ticker supplied in the url so commentary history can not be collected.
Aston Martin Lagonda Share Price
Grade:The Black Grade - Shares That I Think Could Collapse To Nothing Or Suffer A Massive Share Issue.
Title: Aston Martin – Buy Only If You Believe Stroll et. al. Will Support It?
Company: AML - Aston Martin Lagonda
Share Price Then: 55p
Author: Ian Smith
Date: Thu 16 Apr 2020
Comments: I can’t see any safe financial case for investing in Aston Martin and at today’s price of around 55p it is pretty clear that the market is not seeing the recent fund raise as anything much more than a sticking plaster.

The 2019 full year numbers were expected to be bad and they are, particularly the almost 20% drop in sales but once the market had gotten used to the idea that the Yew Tree Consortium was part of a large fund raise ending up with £536m some recovery in the price might have been expected.

Indeed there was a blip bringing the price up to 104p, but that seems to have been speculation on what the price would settle at after the share issue.

Although not ecstatic I did see the share issue as “Well it is a dilution, but it clears a big chunk of the debt and if a bit more is needed then at least the company looks viable”.

Then COVID 19 hit Europe and the USA, as well as China and suddenly sales are expected to drop again and reduced cash flow makes it seems very possible that debt could easily be back to £500m plus in a very short period of time, this is against a market cap of only £167m at 55p per share.

This is not a theoretical worry, even the company talks about having access to £150m, along with shutting down production and laying off staff.

As I understood it, the DBX was going to make or break the company and there are 2,000 orders for it, although it is not clear if these are guaranteed purchases or serious expressions of interest.

So getting the DBX assembly line proven and cars made seems critical, so maybe that is still going on but if it is the company is not being clear about it.

So should we take the Yew Tree involvement as a sign that funds, possibly via another rights issue are fairly secure if needed or will Yew Tree just walk away and write off its investment if the DBX doesn’t prove to be the Golden Goose?

I recently said that the Aston Martin sponsorship of the F1 Racing Point team was in part going to be a return for Lawrence Stroll regardless of the success of Aston, but if debt does start to rise dramatically then there may be an issue of is this the right thing for Aston to be doing?

What would be the consequences of cancelling the Racing Point sponsorship?

It seems worth noting that Aston Martin are a FTSE 250 share but the share price is not following the trend of shares in that index.

For me, unless the DBX is as successful as hoped and I am cautious about that, then Aston even at today’s price is quite possibly a value trap.
Read Count: 172/10120

Buy/No Buy In A Nutshell
NegativesToo much debt and they have already done a share issue to fix that, very heavily reliant on sales of the DBX the new SUV, a worrying number of statements about how sponsoring the Stroll owned F1 team is great news.
PositivesNew management getting much more aggressive with people complaining that they asked for and were given loans but they can't afford them.
Initial Review Price51p
Last Review Price55.73p
Last Review Date02-Sep-2020
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