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  • Writer's pictureMark Watson-Mitchell

Aston Martin And Frasers Group – Well Worth Watching This Week

Aston Martin Lagonda Global Holdings (LON:AML) – Lucid Deal Will Clear The Way

Did you know that Aston Martin is the world’s only independent luxury car group with over 100 years of design and automotive experience?

The group launched its famous DB5 some 60 years ago at the Frankfurt Motor Show and recently it has proudly displayed an example of that model together with its newly launched DB12, featured in the motoring columns, the next such show is in three weeks’ time.

With several new lines in development the group’s Corporate Strategy is really beginning to show some mettle.

At 10am on Tuesday morning (19th) there will be a General Meeting for the group’s shareholders of to approve the details of the group’s new strategic supply agreement with the Lucid Group.

It also centres upon the issue of 28,352,273 Consideration Shares, in what is called a ‘Related Party Transaction’.

By way of the Lucid Strategic Arrangement, Aston Martin will gain access to certain of Lucid’s industry-leading technologies, including electric powertrains and battery systems, for its initial and certain future battery electric vehicle (BEV) models.

It is important to note the key theme impacting the entire auto industry is the transition away from the traditional internal combustion engine (ICE) to a range of electric powertrain technologies.

Use of ICE vehicles is expected to decline over the next decade, with plug-in hybrids and BEVs continuing to rise in popularity, driven in large part by shifting consumer sentiment and legislative changes.

While within the ultra-luxury sports (ULS) market some customers may continue to require ICE products, either for track-only use, or for use in certain geographic markets which may not restrict their sale, BEVs are expected to represent the majority of the ULS market by 2029.

As a result of these trends, the electrification of the Aston Martin Group’s model range is fundamental to its future success and growth strategy.

Accordingly, the proposed alignment of Aston Martin’s iconic brand, ultra-luxury craftsmanship and high-performance in-house engineering excellence with Lucid’s advanced technologies and expertise in luxury electric vehicles would provide Aston Martin with the capabilities to underpin such success and growth, and re-define the customer experience for future Aston Martin BEV products.

The Lucid Strategic Arrangement is, therefore, a significant pillar of Aston Martin’s electrification strategy, providing it with access to leading powertrain and battery systems technology which, combined with Aston Martin’s internal development, would complement the creation of a bespoke BEV platform suitable for all future Aston Martin products, including hypercars, sports cars and SUVs.

Moreover, the Lucid Strategic Arrangement marks the latest development in Aston Martin’s ongoing work to develop alternatives to the ICE, as part of its broader Racing. Green. sustainability strategy. In line with its electrification roadmap, Aston Martin’s first plug-in hybrid – the mid-engine supercar Valhalla – will commence delivery in 2024.

By 2026, all new Aston Martin product lines will have an electrified powertrain option, with a target for its core portfolio of Sports / GT and SUV models to be fully electrified by 2030.

As Lucid is majority-owned and controlled by the Public Investment Fund (PIF), a substantial shareholder of the company with over 16.40% of the AML equity, shareholders have to approve the terms – which, in my view, will obviously come to pass.

The PIF is the engine driving the transformation of Saudi Arabia’s economy, it is passionate about leading local economic development, localising cutting-edge technology and knowledge, while expanding its portfolio of international assets, investing in global sectors and markets by building strategic partnerships, and launching initiatives to contribute to the goals of Vision 2030.

Its aim is to be a global investment powerhouse and the world’s most impactful investor, enabling the creation of new sectors and opportunities that will shape the future global economy, while driving the economic transformation of Saudi Arabia.

The luxury car group’s shares have been an active market of late.

After hitting 396.20p on the last day of July on the back of news of a £210m Placing needed to accelerate the group’s net leverage reduction and to support its longer-term growth, they have subsequently eased back to just 320p 24 days later.

They have recently been the centre of rumours of a possible bid from China, likely to be from the Geely Holdings Group, which is already a major AML holder with 16.67% of the equity.

Geely is controlled by AML Director Li Shufu, the 60-year-old billionaire who founded and is the largest shareholder in the Hangzhou-based Zhejiang Geely Holding Group, a maker of cars and related components, which last year had a $60.4bn revenue.

He is known to play a steady hand in the pursuit of his corporate goals.

He negotiated for two years with Ford Motor Co before in 2010 he eventually paid it $1.5bn to acquire Volvo Cars.

Earlier this year his group sold its 6.3% stake in Daimler Truck Holding AG for about $1.6bn.

It is well worth noting that at the closing price last Friday night of 325.80p, the whole AML group equity is valued at just £2.75bn.

Broker’s analyst Philippe Houchois at Jefferies considers that the group has made considerable progress of late, in stabilising its debt, by increasing the selling prices of its cars and by the revamping of its range.

He recently upped his view of the group’s shares from being a Hold to now being a Buy,

lifting its Price Objective from 300p to 420p a share.

These shares are just bubbling around the current level before, I feel that, a major lift-up in price will occur following even better corporate news – or possibly an actual bid for the group.

Hold very tight to your shares.

(Profile 10.05.23 @ 213.5p set a Target Price of 265p*)

Frasers Group (LON:FRAS) – AGM This Wednesday

This coming Wednesday Mike Ashley’s £3.68bn retailing conglomerate will be holding its AGM to approve the Accounts for the year to end April.

The period showed group revenues up 15.8% from £4.80bn to £5.56bn, with adjusted pre-tax profits some 40.7% better at £478.1m (£339.8m), lifting earnings up from 53.9p to 70.9p per share.

For the year now underway analysts Adam Tomlinson and Wayne Brown at Liberum Capital are confident of an even better year in progress.

They rate the shares as a Buy, looking for 1000p as their Price Objective.

Their estimates for the next three years to end April show £5.78bn sales this year, with £522m profits and 87.8p in earnings.

For 2025 they have £6.17bn takings, £585m in profits and 104.5p earnings per share.

Going into 2026 their figures show £6.58bn turnover with £633m profits generating 120.3p earnings per share.

That profit propulsion is impressive, and the group’s shares deserve a far better market rating than given to them currently.

They closed on Friday night at only 804.5p, which is 24.5p below the after results peak at the start of August.

An interesting buzz over the weekend concerned the possibility that Frasers will soon be selling off its Missguided side to the Chinese online fashion group Shein, news of which could well be forthcoming this week.

With the market generally now showing some more spirit I see the group’s shares rising back to and then way above that level, while sticking firmly to my 1000p Target Price.

Whether any Trading Update emanates from this week’s AGM will be the subject of conjecture, but whatever happens these shares are cheap.

(Profile 28.07.23 @ 798p set a Target Price of 1000p)

(Asterisks * denotes that Target Prices have been achieved since Profile publication)


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