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Authoritative Independent Monthly Share Selections Using Technical & Fundamental Analysis

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Auto Trader - New share issue provides firepower to burn rivals

May 2020

Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.

  • Epic Code:
  • AUTO
  • Price:
  • 385p
Auto Trader has announced a placing of new shares (5% of share capital) to bolster its balance sheet, raising c. £195m (assuming 5% discount to the price). At the end of February it had drawn £289m from a £400m facility with a net debt / EBITDA ratio of 1.1x, well below its covenant level of 3.5x and this will reduce it to just c. 0.35x, says broker Jefferies. Covenants are tested in March and September. Auto Trader is the UK’s largest digital automotive marketplace for used cars and as well as keeping an eye on potential disruption to demand it could be a winner from the enforced closure of rival car retailers’ physical stores. To consolidate its strong position it has also offered customers an o ...

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With small companies there is an above average degree of risk compared to buying blue chips. Please be aware that we have not assessed the suitability of any of these investments for you. The newsletter simply states a personal view and diarises the editor’s investment decisions. Please speak to your stockbroker or other qualified individual to ascertain whether any of these companies mentioned would form useful additions to your own portfolios. Past performance is no indication of future success.

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