Finelist motors ahead nicely: The Investment Column

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The Independent Online
At first glance, Finelist, the motor parts distributor, looks worryingly like one of the 1980s stock market stars which fell to earth in the 1990s. Floated at 130p nearly three years ago, the shares have nearly tripled to 381.5p, the latest storming 32.5p rise coming despite news of a four-for-17 rights call at 320p.

This parabolic trajectory has been fuelled by a pounds 137m three-year acquisition spree, including yesterday's pounds 61m purchase of Tomkins' Ferraris Piston Service parts distribution business. But Finelist, which estimates that profits soared from pounds 4.05m to pounds 7m in the six months to December, looks more soundly based than many of its 1980s lookalikes.

For a start, the management has long experience in this business: the executive chairman, Chris Swan, has been selling car spares for more than 20 years, starting in Halfords.

The combination of that experience and the potential for the business looks compelling. Adding Ferraris to the Autela and Edmund Walker brand names should squeeze an extra pounds 1.9m from the combined operation.

More importantly, it will take Finelist's chain of depots serving independent garages, fleets and the like to 235. Yet this represents a tiny fraction of a highly fragmented industry where the group's boast of supplying three- quarters of the country within the hour and the rest once or twice a day gives them a good chance to clean up. The target is for 400 branches in five years and the only real competitor is the separately quoted Partco.

It's a similar story at Motor World and Charlie Brown, acquired last year in the group's first foray into high street car-parts retailing. Claiming not to compete directly with Boots' Halfords arm, this business has less than 10 per cent of the retail market.

Raising the current 330 shops to the planned 500 by 2001 looks realistic, based on planned expansion into Scotland, East Anglia and the South-east of England.

The pace of growth has been heady. Assuming this year's expectations are met, profits will have multiplied over 33 times to pounds 17.3m in six years. However, the new equity could prove a drag on earnings and the shares, on a forward multiple of 19 falling to 16, could mark time for a while. Worth picking up on any weakness, even so.