James Bond’s car maker Aston Martin is the epitome of British luxury. And when it roars onto London’s public market later this year, at a rumoured value of £5billion, investors will be hoping to make a small fortune from the shares.
There are, however, doubts over the price. Some analysts advise steering clear of the highly valued initial public offering.
The float is set to make a windfall for the Italian family dynasty behind its current owner. Andrea Bonomi, the 53-year-old business magnate who founded and leads private equity firm Investindustrial, is almost as suave as 007 himself.
Aston Martin is set to roar onto London’s public market later this year, at a rumoured value of £5bn
His predecessors built a reputation over the last century as being one of Italy’s five great industrial families, with their dynasty rooted in construction, and now much of the family wealth is ploughed into Investindustrial’s funds.
The firm bought more than a third of Aston Martin in 2012, in a deal which valued the whole of the company at nearly £800million.
Just six years later, the car maker is likely to be worth around six times that sum when it hits the stock market, meaning Bonomi and Investindustrial’s investors will reap rewards.
But some analysts have argued Aston Martin’s sellers – who also include Kuwaiti fund The Investment Dar – are seeking too much.
At £5billion, the float will value the British manufacturer more highly compared to its earnings than Italy’s Ferrari.
Aston Martin would be worth around 20 times next year’s expected earnings, while the Prancing Horse car maker – which trades at a market value of £19billion – would be around 15 times.
A quick look under each company’s bonnet quickly reveals there are more disparities between the companies.
An Aston Martin DB11. The firm is planning to ramp up production to nearly 10,000 by 2020 and approaching 14,000 once its plant in St Athan, Vale of Glamorgan, is firing on all cylinders
Aston Martin has an earnings margin of 24 per cent, effectively meaning it makes back 24 per cent of its sales as profit. Ferrari makes 32 per cent – though its British peer is fast catching up.
Ferrari sold 8,398 cars last year generating total sales of £3billion. Aston Martin, on the other hand, pulled in just £876million and is aiming to sell a comparatively meagre 6,200 to 6,400 cars this year.
But it is planning to ramp up to nearly 10,000 by 2020 and approaching 14,000 once its plant in St Athan, Vale of Glamorgan, is firing on all cylinders.
Perhaps most worryingly, Aston Martin has gone bust no fewer than seven times.
The feelings of nostalgia and reverence which it wields have helped to save its name over that time – a fact which its current management recognises.
In its most recent set of half-year results, the company said it was able to whack higher price tags on remade classics ‘that capitalise on emotive factors’, such as the new DB4 GT.
Individual non-professional investors will be unable to buy any Aston Martin shares through the IPO, though they will be able to scoop them up when big institutional investors later sell them on the stock market.
Elaine Morgan, a portfolio manager at investment firm Kames, suggests some basic considerations before deciding whether this is a good idea.
First, look for a strong and experienced management team who have been successfully managing the business.
Andy Palmer was brought in by Investindustrial to run Aston Martin in 2014, and has so far done a stellar job.
The company pulled in record revenues and profits last year, and sold more special models than ever before.
Second, look for firms which have a large market of people to buy their products and which can make a high return on the money it takes to create them.
Some analysts have argued that Aston Martin has nowhere near the pricing power of Ferrari, meaning customers will simply not be prepared to shell out as much on an Aston Martin car.
But it has increased the average selling prices of core models by 114 per cent between 2007 and 2017, and is limiting the number of each car it creates to maintain ‘desirability and exclusivity’.
In terms of drawing in more customers, Aston Martin may be hiding one last trick up its well-tailored sleeve. Forensic accountant Stephen Clapham said this week the new range of Aston Martin 4x4s should give it a boost.
‘People who want to show off how rich they are, and are too fat or old to get in a low slung sports car, like these big SUVs,’ he said.
After all, everyone wants to play at being James Bond.