Jefferies initiates coverage on Aston Martin at 'underperform'
Jefferies initiated coverage on the shares of newly-listed automaker Aston Martin on Thursday with an 'underperform' rating and a target price of 1,400p per share, noting that as the iconic British firm's IPO did not include any primary capital, selling shareholders may have missed a chance to start a relationship with public equity markets "on the right foot".
The broker said that, although Aston Martin had seen a difficult start to life on the market, its credible investment case and strong management team meant that, in Jefferies view, few stocks in its coverage would deliver a stronger earnings progression.
However, Jefferies noted that the combination of high pricing, secondary-only transactions and a short six-months lockup may, "understandably, keep long-only investors on the sidelines".
Jefferies' analysts also felt that Aston Martin's balance sheet didn't quite balance. Despite shareholders voicing concerns around leverage ahead of the group's IPO, Jefferies said Aston Martin was "yet to provide the liquidity buffer one might expect from a company that is effectively using customer deposits to fund working capital."
On a more positive note, the broker said a luxury manufacturer like Aston Martin was capable of structurally delivering "exceptional returns on invested capital" of more than 50% after tax, putting it ahead of the likes of Hermes and Ferrari.