Inchcape end markets look 'difficult', says JPMorgan Cazenove

JPMorgan Cazenove downgraded its rating on shares of car dealership group Inchcape to 'neutral' from 'overweight' on Monday, slashing the price target to 627p from 803p as it pointed out that end markets look "difficult".

The bank said trends are mixed across geographies, but the majority of territories appear to be on a deteriorating trend.

"While we appreciate Inchcape's relative quality and valuation, we have taken a more cautious view on our recommendation, given this challenging market backdrop," it said.

It said Inchcape currently trades at a discount of around 13% to its long-run price-to-earnings, which "seems reasonable" given the market headwinds it faces.

The bank noted that in Australia, new car registrations are down around 10% year-to-date, accelerating from a 5% drop in 2018. In Hong Kong, meanwhile, January to May registrations are down around 5%, compared to a 3% decline last year.

On the upside, Singaporean trends appear to remain favourable, with both market and Toyota registrations up around 5% year-to-date.

"Over time, we expect Singapore to follow its typical quota cycle, and expect a return to market declines in 2020," JPM said.

As far as Europe is concerned, it highlighted a 2% drop in new car sales YTD, compared to flat in 2018, while UK registration trends "remain poor", albeit with the rate of decline having moderated YTD.

At 1020 BST, the shares were down 5.2% to 596.50p.