Share watch: Dealers’ stock values stumble

Motor dealers have long been the outcasts of the stock exchange. Up to a few years ago there were plenty of cheap shares about, or ‘value investments’ as they call companies with low valuations in comparison to their size.

However asset strippers have been busy and now about the only stocks left at the bottom of the share world’s tank are the motor dealers. It’s probably the general ‘Del boy’ reputation that car dealers have that spills over into brokers’ consciousness, and keeps the whole sector depressed.

Again perhaps the low margins or general auto industry malaise is hard to shake off. Whatever the reason, running stock searches for businesses with big sales and small valuations will always throw up a bunch of dealerships.

HR Owen can boast a strong brand, normally the ticket to a stock market wonder stock, yet its slide into the red of £7m will do little to help its rating. You can buy the whole company for £37m and get nearly £700m of sales.

This might not seem amazing, but a top UK company in the FTSE would expect a rating of at least 1:1 with sales, perhaps 2:1. Even Inchcape, which is lowly valued by FTSE 100 standards, would be worth five times as much and if the company was to achieve a valuation similar to Hornby, the toy model company, it would be worth about £1bn. The shareholder in HR Owen can’t look to stock market stardom anytime soon.

Lookers, whose market cap is £154m, recently bought a Bristol-based brake part company – APEC - for £9m. This looks a lot more sensible than French car part maker Valeo lining up to try and buy the mammoth bankrupt parts company Delphi. While snacking on small companies seems like a sensible strategy, buying Delphi would be an almost sure route to suicidal indigestion.

Meanwhile Reg Vardy has had its target priced raised by Dresdner Kleinwort Wasserstein the massive City stock broker. While is cautious, Dresdner reiterated its ‘add’ rating to reflect, what it thought, was a “positive” AGM statement.