One way to ride the supercar sales boom

28th July 2022 | Sam Volkering & Elliott Playle

Luxury supercars are more ubiquitous on UK roads than ever before.

Despite treacherous macro-economic conditions, sales of supercars are accelerating.

By supercars, we mean high performance sports cars, including models such as Ferrari, Lamborghini and Bugatti.

According to the Guardian, more than 18,000 supercars were registered at UK addresses in 2021, a 19% increase on 2020.

The City of Westminster, which includes the affluent areas of Mayfair, Belgravia and Knightsbridge, is the undisputed supercar capital of the UK – 553 supercars are registered to addresses in these suburbs.

Kensington and Chelsea is second, with 507 supercars, and Buckinghamshire third, with 453.

According to accountancy firm UHY Hacker Young (UHY), the coronavirus pandemic is the main reason for increased supercar adoption.

After a difficult lockdown period, attitudes towards them have changed, with UHY referencing a “treat yourself” mindset amongst buyers.

In addition, the pandemic has left the richest 10% in the UK with more disposable income. On average, the richest 10% gained around £50,000 during the pandemic, with saving becoming easier due to reductions in spending that came with business closures.

As a result, the six-figure cost of many supercars has become easier to bear.

Also, with the impending recession, and policy interest rates continuing to rise, we could see the disposable income of net savers increase further.

In addition, UHY cites the low-cost finance available for supercars, whilst also suggesting that favourable crypto market conditions last year made many people “overnight millionaires”.

What’s more, the signs are that UK supercar adoption could increase further.

According to renowned supercar salesman Tom Hartley, the prices of supercars will likely fall in the coming months, encouraging greater uptake. He attributes this to growing uncertainties regarding the Russia-Ukraine conflict.

For example, Hartley is already selling the signature Ferrari SF90 model for £70,000 less than its normal list price.

We believe the growing adoption of supercars is a positive for Surface Transforms (LSE: SCE) and Aston Martin Lagonda (LSE: AML).

Surface Transforms is a developer of carbon ceramic brake discs for supercars.

The company has some notable commercial partnerships with prestigious supercar manufacturers, including Lamborghini and McLaren.

Surface Transforms’ latest commercial update is encouraging.

For the six months ended 30 June 2022, the company recorded revenues of £2.9 million. This is a whopping 240% increase on the same period in the previous year.

In addition, the company has rectified production issues at its manufacturing facility in Liverpool, which we referenced in our 23 December 2021 update.

Things are running smoothly once more. In fact, the company is currently refining its manufacturing strategies to increase sales capacity from £20 million to £50 million, without additional capital expenditure.

We believe Aston Martin Lagonda will also benefit from the rise in supercar sales.

The company is a provider of luxury performance cars.

In our 21 July 2022 update, we spoke of our optimism towards the company, following the announcement of a partnership with Saudi investment group, the Saudi Public Investment Fund (PIF). In particular, the partnership will provide Aston Martin with £650 million, providing it with a strong “liquidity cushion” against its debts.

Since the announcement, no further developments have been made.

Nevertheless, we believe this injection of capital will help Aston Martin to boost sales, at a time where supercar adoption is clearly on the rise.

We reiterate our BUY recommendations for Surface Transforms and Aston Martin Lagonda. You can find the respective, original recommendations here and here.

Saying good riddance to (some) social media

One last thing. I’ve decided to shut down a couple of my social media accounts.

More specifically, I’ve stopped using Twitter completely and have completely deleted my Facebook account.

Regarding Twitter, I have used Twitter previously as it can provide a helpful curated feed for up-to-date news and information. However there’s a darker side to Twitter. A side that’s full of misinformation, hate, abuse, and just general toxic behaviour. It’s a drain on energy and spirit.

While sometimes useful, I started asking myself how much does this really enrich my life and my work? The answer was, not very much. It’s addictive and ultimately unproductive. So I’ve stopped posting, logged out, and deleted the app from my mobile devices.

What you will note is that my Twitter account @samvolkering is still there (although I’ve labelled it **inactive**). The reason I’ve kept the account alive is that I know scammers will take it if I completely remove it. I don’t want that. So the account is live, but inactive.

Facebook was a much easier decision. I never use it and any post I’ve ever made was full of scammer comments. So that’s completely gone, deleted, for good.

Why I’m telling you this is important. If you ever receive a message from me on Twitter or Facebook going forward, it is not me. It will be either a scammer or an imposter, not me.

I do still have LinkedIn – mainly so old school mates can find me (as one recently did who just moved to the UK) but I rarely use that anyway.

If anyone needs to get in touch with me, you can do so as usual through Southbank Investment Research. That’s where my best content lives, it’s where my intel and advice and guidance will be going forward.

Good bye and good riddance Twitter and Facebook.

Buy list update

Mode Global Holdings (LSE: MODE)

Mode is a payments ecosystem that allows users to pay with and manage digital assets such as bitcoin.

It’s been a little while since we visited Mode.

In truth, commercial updates have been few and far between this year.

The company has been in a transition period, with changes to its board. In March, Rita Liu replaced Ryan Moore as CEO, with Mode citing the “next exciting phase of growth.”

The company has had to grapple with a treacherous crypto landscape, where valuations of many cryptocurrencies and crypto-centric stocks have plummeted.

For example, bitcoin is currently trading at around one third of its all-time high of $67,566 set in November 2021.

Mode itself has fallen in line with this, dropping from its November 2021 high of 40GBp to 4.55GBp at the time of writing.

However, looking at its most recent commercial update, we believe there is reason to believe that this drop in share price is not due to a systemic issue within the company.

Rather, it re-installs our faith towards Mode and its long-term growth prospects.

For the full year 2021, Mode’s user base grew 261% on the previous year. In addition, trading volumes increased by 732% in 2021, compared to 2020.

What’s more, revenues nearly trebled between 2020 and 2021, rising from £450,000 to £1.31 million.

Admittedly, we’re not expecting the same kind of results for Mode this year, given current conditions in the crypto market.

However, we believe Mode has the resilience to see out this difficult period. For example, the company has a healthy cash buffer, especially after raising around £2 million in gross proceeds following a shareholder fundraising event on 13 July 2022.

Also, chairman Jonathan Rowland is envisaging business growth this year, following the launch of its QR code payment solution last year.

When you consider the long-term potential of crypto, we believe that Mode offers a hefty discount to anyone seeking to ride this exciting trend.

We reiterate our BUY recommendation on the stock. You can find the original recommendation here.

Mirriad Advertising (LSE: MIRI)

Mirriad is a video technology company that dynamically inserts content into adverts after they have been produced.

Mirriad’s latest commercial update isn’t what we’d hoped for.

For the six months ended 30 June 2022 (H1 2022), revenues came in at £577,000, less than half of the £1.37 million figure recorded for H1 2021.

In the main, the drop in revenues was fuelled by weaknesses in the Chinese market, with China still in the midst of coronavirus lockdowns. Altogether, Mirriad’s Chinese revenues dropped by 85% between H1 2022 and H1 2021.

With this in mind, Mirriad has plans to wind down Chinese operations when its contract with technology giant Tencent Holdings expires in March 2023.

Following the news, Mirriad’s share price sank around 42.4% between 21 and 22 July 2022.

Whilst we acknowledge the sudden share price decline, there is some consolation for Mirriad.

In H1 2022, United States-based revenue grew by 57% from H1 2021 to H1 2022. US revenues now account for 72% of total revenue.

As per our 2 June 2022 update, we believe the United States is where the real future opportunity for Mirriad lies, with many subscription services seeking ways to incorporate adverts at a time where cost bases are being squeezed.

What’s more, the company is expecting stronger revenues in H2 2022, as it shifts its priority to the US market.

With current news flow in mind, we are moving Mirriad to a HOLD.

As ever, we will keep a close eye on any further developments.

You can find the original recommendation here. Remember to check the portfolio for the latest advice here.

The Frontier Tech Investor “Top Three”

Sometimes it’s hard to decide on which stocks to invest in from our buy list.

Below is our Frontier Tech Investor “Top Three” section showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.

This doesn’t mean our other stocks are no good: this is just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.

Pod Point Group (LSE: PODP) – The UK’s inadequate (for now) electric vehicle (EV) charging network is threatening to bring the EV transition to a halt. By 2032, the shortfall of EV charge points in the UK is estimated to reach 250,000. However, Pod Point’s innovative range of EV charging solutions could go a long way in ensuring this deficit is reduced. The company’s charging technology is fit for homes, public charging bays, lamp posts and commercial buildings, and can ensure that the EV transition reaches all areas of the UK. In our view, Pod Point can unlock the potential of the UK’s EV charging network. You can find the original recommendation here.

Team17 (LSE: TM17) – Team17 is a video game publisher. It has a large collection of games which contains some of the most popular games of the gaming world. One of these is Worms, the enthralling last-man-standing survival game born out of the 1990s gaming boom. Team17 is keeping up with the times and offers its games across a number of contemporary technology platforms. It has even flirted with the idea of non-fungible tokens (NFTs), a trend which could revolutionise the gaming industry. At a time where sceptics think online gaming will come off the boil following the ease of lockdown restrictions, Team17 keeps gamers coming back for more. You can find the original recommendation here.

AB Dynamics (LSE: ABDP) – AB Dynamics is a provider of automotive testing services. The automotive industry is undergoing rapid transformational change, heading for an electric and autonomous future. This brings an ever-changing regulatory landscape, with automotive manufacturers needing to ensure they adhere to the latest safety standards. AB Dynamics testing services are helping to make arduous, chaotic testing periods more seamless than ever before, ensuring that the vehicles of tomorrow are fit for our roads. AB Dynamics has recently tipped over its buy limit – however, should it fall back below, we reiterate our buy recommendation. You can find the original recommendation here.

Sam Volkering
Editor, Frontier Tech Investor

Elliott Playle
Analyst, Frontier Tech Investor