Marshall Motor Holdings PLC (LON:MMHM) released a trading update, which indicates that the group’s Q4 performance is now expected to be ahead of management and market expectations. Driven by stronger than anticipated used car sales with healthy margins, PBT is now expected to exceed FY17’s record level for the continuing business. We are increasing our FY18e PBT and EPS by 6.4%. Brexit uncertainty remains at the forefront of FY19 prospects, and as some of the currently favourable market dynamics may wane, we leave our FY19 estimates unchanged. The P/E ratio for FY19 is an undemanding 5.8x.
Q4 used car sales benefit from new car shortages
The disruption and volatility seen in the supply of new cars that arose from the introduction of the Worldwide Harmonised Light Vehicle Testing Procedure (WLTP) emissions regime from 1 September 2018 has had some positive consequences. With constrained supply of certain new models, buyers appear to have switched to replacing cars with nearly new models. As a result, used car sales were higher than expected with healthy margins maintaining the 37 basis point rise for the segment seen in H118. The period also compares to a weak trading period in Q417. New car shortages are also thought to be benefiting margin, albeit on lower volumes. We increase our FY18 revenue expectations for MMH by 0.4% and our EBIT by 4.8%. Our FY18e PBT increases 6.4% to £25.7m from £24.2m previously, and compares to £25.4m for the ongoing businesses in FY17. FY18e EPS also increase by 6.4%.
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