Aston Martin aims to overtake Ferrari with IPO of up to £5.07b

Milan

ASTON Martin is seeking a valuation that could top its only listed rival, Ferrari.

The maker of luxury sports cars made famous in the James Bond movies filed for an IPO in London on Thursday that would value the British company at up to £5.07 billion (S$9.1 billion). That would surpass the multiples of Ferrari, which makes more profit and churns out oodles of cash.

The valuation is "a big vote of confidence," chief executive officer Andy Palmer said in an interview, noting that the company was worth less than one-tenth its current value when the turnaround started.

"Most important from my point of view is that we are only halfway down the runway. We renewed the existing portfolio and we have a lot in front of us."

He said the company's first SUV is coming out in 2020, giving it access to the Chinese market and a headstart over Ferrari, which this week postponed its Purosangue (Italian for "thoroughbred") SUV to 2022.

Luxury carmakers are crowding into sport utility vehicles to capture high profit margins that will fund initiatives such as electrification.

Based on its first-half earnings, Aston Martin could be valued at more than 24 times adjusted Ebitda, a calculation that doesn't take into account its debt and R&D spending - which would push the multiple higher.

Ferrari trades at about 20.5 times its expected adjusted Ebitda for 2018, based on Bloomberg data - a figure that is closer to luxury good companies than to carmakers.

Analysts, however, are sceptical that Aston Martin's business can command a valuation like Ferrari's.

"We love the brand. We respect the management team. But we simply can't see how a Ferrari multiple looks realistic," Max Warburton, an analyst at Sanford C. Bernstein & Co, said in a research note. "They are selling a business that is loss-making on a US GAAP (Generally Accepted Accounting Principles) basis, with a weak profitability record and a fragile balance sheet, selling cars at much lower price points, to a much less dedicated audience."

The UK carmaker will sell a 25 per cent stake at between £17.50 and £22.50 per share, it said in a statement. Trading will begin on the London Stock Exchange around Oct 8 after an Oct 3 pricing.

Even at the bottom of the targeted range, which would value the company at about £4.02 billion, Aston Martin's owners will be making multiples on their investment.

In 2012, when London-based Investindustrial Advisors bought a 37.5 per cent stake, the company was valued at about £420 million, Mr Palmer said. Daimler will convert its holding of about 4.9 per cent to ordinary shares.

Aston Martin shareholders are cashing out months before the UK leaves the European Union. While the UK's post-Brexit automotive industry is one of the sectors most exposed to potential trade hurdles, the company is "well insulated" in the case talks break down and Britain leaves the bloc without a trade deal, Mr Palmer said.

Aston Martin posted a 24 per cent adjusted Ebitda margin in the first half as it made £104 million on £445 million in sales. The company is aiming to boost that figure to above 30 per cent in the medium term.

Ferrari's profit on that basis was 1 billion last year, with a 30 per cent margin. The Italian company said this week it plans to increase that figure to 38 per cent by 2022. That would put it on par with luxury goods maker Hermes International. BLOOMBERG

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