Redde Northgate (LON:REDD) appears to be in a good place at the present time as the share price, which continues to tick slowly upwards would suggest. There are several reasons to be positive on the company's prospects in my view, which I have summarised below. I would add that I am a holder and so am naturally somewhat biased.
- The UK economy has rebounded better than perhaps could have been expected, which one assumes has further stimulated the demand for van rentals, adding to the already existing need for delivery vehicles to service the growth in on-line shopping. I am unsure of the situation with the Spanish economy but it is reasonable to foresee the same situation playout as it gradually recovers from the pandemic. Whether the current lack of HGV drivers in the UK is a positive for Redde Northgate (LON:REDD) I don't know.
- The high valuation of second hand vehicles as confirmed by listed car dealers such as Vertu and Marshalls.
- The opening up of the economy should, it is reasonable to assume lead to increased activity at the Redde part of the business that operates in motor insurance, accident and incident management and vehicle repairs.
Despite the above, the shares remain modestly price on a PE 12.5 or thereabouts for the current year falling to 10.5 for the year ending April 2023 with a 4% + yield. If I include the price to book and cash generation of the company, it would not be a surprise to see a bid materialise. The investment mantra or should I say truism is to run 'ones winners' and to paraphrase Robbie Burns and no doubt other successful investors buy shares that are going up. The latter is difficult for many investors, myself included, However I added a small amount to my existing holding, paying twice the price as my original purchase. Wise or foolish time will tell!
Which brings me to the question what could wrong? Black swan type scenarios come to mind such as a resurgence of the pandemic or accounting irregularities. Also the positive trading conditions referred to above will not last indefinitely.
All thoughts and views welcome.
All the best
