AUTO TRADER (AUTO) 434.5P

Shares - - TALKING POINT -

Auto Trader’s share price was hit in Oc­to­ber when ri­val busi­ness Mo­tors.co.uk was bought by Ebay and in­vestors wor­ried the lat­ter would be­come a much stronger player in the car mar­ket. For­tu­nately Auto Trader’s half year re­sults on 8 Novem­ber helped to win back in­vestor in­ter­est with strong num­bers in­clud­ing pre-tax profit up 9% to £114.5m.

We con­tinue to rate the busi­ness highly and so does Mer­can­tile (MRC) fund man­ager Guy An­der­son who sees the firm as ‘a long-term com­pounder’ for his in­vest­ment trust port­fo­lio.

He says Auto Trader is ‘clearly a cat­e­gory killer and a mar­ket leader by a sig­nif­i­cant mar­gin’.

Pro­vid­ing an on­line mar­ket place for car re­tail­ing, Auto Trader is ‘fo­cused on used car trans­ac­tions, has ex­cel­lent pric­ing power, very high op­er­at­ing mar­gins and gen­er­ates a lot of cash it can re­turn to share­hold­ers,’ adds An­der­son.

In­vestors need to keep a close eye on its av­er­age rev­enue per re­tailer and whether this met­ric comes un­der pres­sure in the wake of the more com­pet­i­tive en­vi­ron­ment.

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