Worldwide car dealer may see sales stall
The retail outlook in the UK, apart from a few that have a large internet presence, could not be much worse with March British Retail Consortium figures showing the worst decline in 16 years.
Even though car dealer Inchcape (INCH) has a worldwide presence, its UK and European sales still command about 31 per cent of its operating profits and one wonders if its operations in the rest of the world can support this region?
Surprisingly, for something which sells big-ticket items, the shares have performed well, helped by the booming Australasian and Asian economies.
However, interest rates in Australia and China are rising along with inflation. Fuel costs are soaring, possibly leading to people to find other ways to get about rather than by car.
The boom times for Inchcape may not last forever at this rate and perhaps, having seen the dead-cross in the share price about a month ago, may be seen as an early indicator that profit taking is starting to become a serious consideration by institutional and retail investors.
The £1.6 billion company has £205 million in net cash and trades on a price to earnings ratio of 11.25 so by these metrics Inchcape looks in good shape.
However, my view is sales may stall in the UK and Europe. This combined with a potentially more cautious purchaser in the southern hemisphere, may lead to a further deterioration in the share price.
Expect support to come in at 320p and through here back to 280p. If the stock closes above 415p then consider cutting the position.
Note that the company is scheduled to deliver an earnings conference on 5 May.
Update
Smith & Nephew (SN.) – suggested to sell at 676.5p, the stock closed yesterday at 670p – the stock has aced particularly weak given the sharp rise in the FTSE 100 which favours holding. If the stock closes above 720p, cut the position.
Carpetright (CPR) – suggested to sell at 636p, the stock closed at 688p after what appears to be a dead-cat bounce. Hold for now.
ITV (ITV) - suggested to sell at 78.05p last week, it closed yesterday at 75.7p. If the stock closes above 80p, cut the position.
Aquarius Platinum (AQP) – suggested to sell at 345.9p, the stock closed yesterday at 347.9p. Keep the stop at 366p.
Aveva (AVV) – suggested to sell at 1591p, the stock closed yesterday at 1598p. Keep the stop at 1675p.
Tui Travel (TT.) - suggested to sell at 237.1p, the shares closed at 236.1p: Keep the stop based on a close above 240p.
The writer does not hold any shares or derivatives in the above mentioned companies. The material for this report comes from Sharescope.
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