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Barclays initiates coverage on Inchcape with 'underweight' rating
Barclays initiated coverage on automotive dealer Inchcape on Thursday, issuing the London-based firm with an 'underweight' rating and a target price almost 20p lower than its current trading amount.
Barclays said that while Inchcape had been focussed on trying to shift its profit pool to higher-growth markets - these things take time, and with hits expected to come from its declining Singaporean market share and FX fluctuations, the leisure and consumer analysts suggested the likes of Greencore or Bakkavor offered higher returns.
Along with the underweight rating, Barclays issued Inchcape with a target price of 695p, below its closing price overnight of 724.5p.
Inchcape was seen as being at the at the top of its "feast or famine" certificate of entitlement cycle, the Singapore government's programme designed to limit car ownership and the number of vehicles on the country's roads. This led Barclays to project declines in new car sales on the lion island with EBITDA to decline by as much as 60%, as had happened between 2008 and 2012, plus an impact of strengthening sterling in recent months.
The bank also pointed to Inchcape's £1.6bn inventory, 60% of which had been financed with short-term loans reported in trades payable as opposed to debt as being a mid-term concern for the group.
Global declines in consumer sentiment when it came to the purchase of new auto-vehicles also concerned the analysts.
As of 1420 GMT, shares had lost 1.10% to 716.50p.