Author Topic: MOTR.L - Motorpoint Group  (Read 1467 times)

no_free_lunch

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MOTR.L - Motorpoint Group
« on: September 12, 2019, 06:38:51 AM »
I have started a position in Motorpoint Group.  This company is a nearly new (aka used) car dealer in the UK.  There is a great writeup on VIC that i recommend you reference as I can't add to much to it.

I will just give you the basics here, in point form and everyone can decide for themselves if they want to look further:

- Has grown double digits organically.  Growth is via existing stores + the occasional dealership opening.
- No debt.
- Small cap.
- Has repurchased 10% of outstanding shares over past few years.
- Management has skin in the game.
- Pays a 3.5% dividend.
- Conservative management.
- Trades at a PE of 10-11.
« Last Edit: September 12, 2019, 06:58:22 AM by no_free_lunch »


samwise

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Re: MOTR.L - Motorpoint Group
« Reply #1 on: September 12, 2019, 08:14:37 PM »
I have a small position. Itís cheap, earns high returns on existing equity, can reinvest some cash in new stores at the same high returns, and has returned other FCF to shareholders by dividend and buyback. Itís a good business at a decent price. If only they had more reinvestment opportunities, it would be perfect. Itís compared to KMX, but doesnít do any financing, sells newer cars, and sources from more than just auctions.

But I donít own a large position because I donít understand the durability or source of their advantage. Iíve thought about it, and here is what I currently think. Why should they earn good returns? Itís just a retail operation which buys from large fleets and BCA auctions, then sells to price conscious consumers. On both sides they are probably price takers. Plus they offer consumers lowest prices, i.e. lower margins. I think they get the good ROE by lower margins but higher turnover, and they use floorplan financing, a form of leverage. The turnover is based on the brand they have in front of consumers: lowest prices, no haggling, online selection. Why canít a new competitor copy that business model? Sure the brand will take some time to build, but you can do it locally one market at a time. The only durable and defensible part of their advantage is probably from size: larger online selection, perhaps easier access to floorplan financing.

Do you understand why they should keep earning high ROE? Whatís the moat here? Not saying it doesnít exist. Just trying to understand it. Perhaps people who have followed KMX know about their advantages.

And why did a large shareholder sell a big block recently?

kab60

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Re: MOTR.L - Motorpoint Group
« Reply #2 on: September 12, 2019, 10:01:22 PM »
I think most businesses can be copied. They might not have a moat, but don't underestimate execution. Their NPS and repeat customers gives me confidence they're not your typical car dealership. The big shareholder apparently sold due to a divorce. Stock was trading at 250, Company bought a chunk at 200. I like that.

no_free_lunch

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Re: MOTR.L - Motorpoint Group
« Reply #3 on: September 12, 2019, 10:33:02 PM »
There should be a scale advantage relative to smaller competitors.  Beyond that it does come down to operations.  I wonder what the current roe is on peers, probably not this high.  You have management acting in shareholder interest via div and buybacks, could go ok.

kab60

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Re: MOTR.L - Motorpoint Group
« Reply #4 on: September 13, 2019, 02:16:48 AM »
Anyone know why they don't open new stores more aggressively? Sure it would put some pressure on their margins, since they take time to ramp, but still? Target is 20, I believe they're at 12-13 now?

no_free_lunch

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Re: MOTR.L - Motorpoint Group
« Reply #5 on: September 13, 2019, 06:51:49 AM »
I was under the impression that the store openings will always be slow. It takes significant effort to set them up, there is risk, they want to do if right.  This is one reason I think of management as conservative.

samwise

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Re: MOTR.L - Motorpoint Group
« Reply #6 on: September 25, 2019, 08:56:30 PM »
This is a tough industry! I found lots of banckruptcy and failures. So I agree it is all about execution.

Some interesting reading and watching for those following this stock. The first article talks about the importance of the store manager in the car supermarket business, of which Motorpoint is the biggest at 20% share. The collapsed chain was third largest, so not sub scale.

https://www.motortrader.com/general-news/is-this-the-end-of-the-line-for-multi-site-car-supermarkets-12-03-2007

The author of the next paper picked three winners for UK online used car sales, but Motorpoint wasnít in that top three.
https://en.calameo.com/read/005962371ce4bd3c2692a?page=1

A show which featured a Motorpoint shop, starting about 18-20 minutes in the episode. The video doesnít indicate any online sales in 2013.

https://www.dailymotion.com/video/x6q0lsb

kab60

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Re: MOTR.L - Motorpoint Group
« Reply #7 on: September 27, 2019, 03:03:08 AM »
Thanks for the above. Also check out Pendragon. Closing 2/3 of their Car Stores. The US is also littered with companies trying (and failing) to copy Carmax.