Trading On margin

Small Cap Value Report (Wed Jun 30, 2021) – CEO



Hi, it’s Paul and Jack here with Wednesday’s SCVR.

Agenda –

Paul’s section:

Jacques’ section:

Pendragon (LON: CEO) – Pendragon confirms what his peers say. Trade is strong for auto retailers right now. These stocks are often cheap due to their low margins, but industry-wide reclassification may need to continue to work. However, a potential disruption of the H2 supply is reported as a possible concern.

Warning

A friendly reminder that we do not recommend any action. We aim to cover the notables business updates & results of the day and offer our opinions on them as possible candidates for further research if they arouse your interest. We tend to stick with companies that have daily news and market caps of up to around £ 700million. We avoid the smallest blue sky type companies and a few specialized sectors (eg resources, pharma / biotech).

A central assumption is that readers DYOR (do your own research) and discuss in the comments below. Comments, by the way, sometimes add as much value as articles. We welcome all rational points of view, be they bulls or bears!


Jacques’ section

Pendragon (LON: CEO)

Share price: 18.43p (pre-open)

Shares in circulation: 1,396,944,404

Market capitalization: £ 257.5million

This is a quick update before the close of Pendragon, an auto retailer that split from Williams in 1989 and focuses on specialty and luxury franchises. Since then, the group has grown thanks to numerous acquisitions. Marshall Motor Holdings (LON: MMH) and Vertu Motors (LON: VTU) have also been updated recently, both signaling strong trading conditions, so it seems like a useful part of the market to watch.

There are probably other areas of the market that need attention at this point – freight and logistics come to mind, but if the current global logistics deadlock is only a temporary problem, then maybe be that the window is limited? On the other hand, companies with supply problems might be overly optimistic about the situation.

Let us know if there are any other specific market sectors to watch over the next couple of years, in your opinion. For now, back to auto retailers – these stocks follow each other closely, suggesting an industry-wide improvement.

As with the others, Pendragon appears to offer good value for money with an expected PE ratio of 9.3x, an expected PEG of only 0.2, and a value rank of 72.…



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