MOTR.L - Motorpoint Group

[no_free_lunch]

Fantastic, thanks for the post kab.

 

I really like this company and feel that their performance through covid was great, all factors considered. I actually liked their slow but steady growth so with the new strategy will hold but will be keeping an eye on the exits.

 

Just went through the annual report.  I hadn't realized how strong their online offering had become.   69% of sales were online in the year, iwhich comparing against first half with 40% online, would imply 80%+ in the second half.  Obviously covid pushed them into it but perhaps management is now more comfortable with the model and has opened up expansion.

Edited June 18, 2021 by no_free_lunch

[kab60]

2 hours ago, no_free_lunch said:

Fantastic, thanks for the post kab.

 

I really like this company and feel that their performance through covid was great, all factors considered. I actually liked their slow but steady growth so with the new strategy will hold but will be keeping an eye on the exits.

 

Just went through the annual report.  I hadn't realized how strong their online offering had become.   69% of sales were online in the year, iwhich comparing against first half with 40% online, would imply 80%+ in the second half.  Obviously covid pushed them into it but perhaps management is now more comfortable with the model and has opened up expansion.

There is a management presentation here which I'd suggest to go through. I don't think this should be a 250m company. Management is very high quality. https://wetransfer.com/downloads/fbe55e495fe4262f10e49c4b0543553520210616100549/af402d

[no_free_lunch]

Thanks, i found a presenation online in the end. It states 89% online sales in q4, so this truly is an e-commerce used car company.  Interesting comparison to kazoo both in the presentation and earlier in this thread.  $1b revenue motorpoint vs $150m kazoo, whereas the market caps are flipped $0.25b motorpoint vs $5b kazoo estimate (it's not ipo'd yet).

 

The growth initatives include sites that allows outside companies to list products on their site with a commission model.  They expect this to launch  over summer and fall of this year.    From their presentation: "We currently wholesalec.35k units per annum, <2.5% market share", think about what would it look like if they had 10% market hsare or 140k units per annum.  At  $300 margin per car (I just made this number up but seems ballpark reasonable), that would be $40m profit just for the online auctions, it's quite a lot relative to their market cap.

 

This is a really interesting play, you can see the potential if the growth starts to deliver.  I have invested in them long enough that I have some confidence in management to meet their targets, more or less, so it doesn't feel pie in the sky to me.

Edited June 18, 2021 by no_free_lunch

[kab60]

The presentation I shared is a conference call with management and Q&A. There are lots of interesting nuggets which arent in the presentation. Really suggest listening from 30-40 min mark (outlook, strategy) if interested in the biz. Guy on Twitter shared it, since it wasn't publisted on their IR site (which is obviously something they need to improve). 

 

As you allude to, the runway is extremely long. They have 25 pct share in their most mature markets, they are the low cost provider, and they share the economics of their biz with their customers - as well as foregoing shorterm margin improvements to improve value proposition for customers. If these guys execute, I could see this biz grow 10x.

 

Big risk is execution but also deep pocketed competitors foregoing profits for growth. That hmight make it harder to buy right/source the right cars cheaply, which is basically what the business comes down to.

[jefke]

Results on 16th of June, insider purchases on 17 & 18th:

13 445 shares at £2.96 for Chris Morgan (CFO)
16 300 shares at £3.03 for Keith Mansfield (Non-Executive Director)

https://www.londonstockexchange.com/stock/MOTR/motorpoint-group-plc/analysis

[Anglozurich]

"I don't think this should be a 250m company"  @kab60 Best quote on this thread so far and made me laugh.... It really shouldn't be, I agree.

 

Mark Carpenter is impressive to the extent he could run a company 100x the size. He batted the analysts questions out the park. Everything he says screams of capital allocation running through his veins and you just know he has a big amount of his own money at play here based on everything he said. What a guy (I hope i dont come to regret that if this gets stolen by private equity - UK businesses are getting fleeced by private equity but i am confident with the big shareholders (Immersion, Punch Card, Forager) -a bid just wouldn't get through given the run way. The online story is very exciting, not just because of the runway and the sheer amount of cars sold online, but you feel like management can execute in a calm and organised way. I have noticed Cinch sponsoring Queens tennis and Cazoo sponsoring football teams. He took the words out of my mouth, once consumers know broadly who you are, the return on advertising £s diminishes. This is not a 'consumer brand' business. You need an 'employer brand' to motivate the staff - thats incredibly important and i know from contacts, people are very proud to work at MOTR - its actually very competitive to get a sales job there. 

 

I honestly dont think it matters whether you pay £250m or £400m for this business. Its going to be worth a lot lot more in 5 years times. Dont buy it if volatility bothers you. I personally love the illiquidity - the stock will catch fire on H1 results. I am hearing used car sales in the UK are going crackers. 

[hasilp89]

Friday, June 18, 2021

11:28 AM

Have spent some more time on this. Agree its very interesting. Was mentioned upthread but am thinking about what the moat here is - throwing out what I see but open to suggestions / pushback.

 

• Mark mentioned on the call that the limit in their industry is supply of cars. "If you can't move cars your vendors aren't going to be with you very long." On the flip side if you can "shift" cars you're vendors are gonna give you more. MOTR can move cars and as a result passes on savings to consumers. Maybe I'm trying to shove this into a box but it seems like there is some sort of scale economies shared there.
• Access to floorplan facilities - think this was mentioned upthread - on the face of it makes sense that a proven operator is gonna get better financing. Correct me if I'm wrong but the floor plan financing appears is critical to high ROE (especially given low margins).
• The hustle - when I think of what would make a good used car dealer I think of someone who can wheel and deal - because the available inventory is always in flux you have to be able to think on your feet, source inventory differently when there isn't much out there, be able to move inventory quickly and generally have a feel for what is selling.  Selling used cars and turning inventory 11x a year seems to be as as much an art as a science - I honestly think an MBA would be a hinderance. It may have been on the ABG thread but believe some one discussed how important inventory turns were in this industry. From the call it sounds like Cazoo is at 4x vs. MOTR's 11x. (Is this turns per year? Or days to turn a car- assumed the prior)

 

A few random questions: 

• Where have you spent time learning about the vendor/wholesale/auction side of this business - ie where the cars come from? This was one of the (numerous) red flags with $lotz - they were relying on Related Parties for sourcing - as it turns out that relationship recently went sour quite recently.
• Any concerns with how quickly this appears to be ramping. Noticed Mark said they have around 5 new folks in senior positions. Risk that they move to quickly?
• Mark mentioned they'd sell 3+ year old / higher mileage vehicles if needed but what's the rationale for sticking so hard to less than 15k miles.
• Why haven't they pushed ancillary revenues/profits from financing etc? (or have they and I'm missing it - ABG gets 20% of GP from financing vs. 3% of revenue) 

Edited June 22, 2021 by hasilp89