News Column

AA stalls, but this is no scrapheap stock

June 24, 2014

JULIAN HARRIS



IT'S ALL rather manic in the markets right now. A year that started at break-neck speed has been run off track by a series of IPO flops, leaving folk on the buyside mightily unimpressed. And as the road rage intensifies, investors are directing much of their anger at private equity sellers.


Such a toxic and febrile atmosphere bodes rather badly for the AA. Private equity sellers? Tick. Multi billion pound debt pile? Tick. Sudden dash to market? Tick.


It's little wonder that shares fell more than seven per cent in conditional trading.


The float appears to be at odds with current market conditions, and suspicions could be further raised by the fact that the AA's sellers are not retaining any shares.


But despite the immediate danger, a sensible investor is one who can rise above the furore and survey the horizon. In the US, floats in recent years such as Facebook and Man United - which dived at first, only to climb in subsequent months - act as a reminder that immediate market reactions can be overcome.


The AA is a highly-trusted brand, and it has the chance to expand further into areas other than vehicle rescue. As well as the driving schools and insurance business, it can bring drivers better route-finding technology, and, who knows, maybe even get involved with futuristic driverless cars.


This is a firm with rising profits that rakes in nearly a quarter of a billion pounds each quarter. Maybe its new investors, such as the notoften-wrong Neil Woodford, are quite right to get on board.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: City A.M. (UK)


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