The Investment Column: Salvesen should have accepted bid

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The Independent Online
Does the stock market need another car dealer? As an industry, motor distributors suffer from wafer-thin margins, overcapacity and low growth prospects. Not to mention the grip exerted over their businesses by the car manufacturers. Most dealers have made appalling investments.

Sytner, founded and chaired by former racing driver Frank Sytner, is better than most. In the three years to December 1996 profits rocketed from pounds 480,000 to pounds 2.67m. A further rise to pounds 6.5m is forecast for 1997.

Much of the growth has come from acquisitions. But Sytner has also squeezed better sales out of the dealerships it takes over. It plans to use the pounds 16.9m float proceeds - a further pounds 6.2m will be shared between venture capitalists and directors - to expand and take on new marques like Jaguar.

There are pitfalls, however. Manufacturers will jealously limit the number of dealerships Sytner is allowed to take on. An environmentally inspired tax on gas guzzlers would also hurt Sytner more than most.

It may be one of the best car distributors around. But at 230p - a multiple of 11 times forecast earnings - the shares are not worth chasing.