Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

The Italian luxury yacht maker, <a href="https://www.smartkarma.com/entities/ferretti-spa" target="_blank" data-smartkarma-citation="entities:28335:1" rel="noopener">Ferretti SpA (FER IM)</a>  has filed for an initial public offering on the Milan Stock Exchange to raise net proceeds of approximately EUR120m at the midpoint of the IPO price range. The company makes luxury yachts and speedboats under several well-known brands including Wally, Ferreti Yachts, Pershing, Itama and Riva. The company previously traded publicly, however, it was delisted in 2003 and was acquired by private equity firm Weichai Group (China) in 2012. Weichai Group currently owns approximately 86% of the company while Piero Ferrari (through F Investments SA) holds 11.14% of the company. The Chinese group managed to turn around the company into a profitable entity in 2016 while it also helped pay-off the debt.<table class="table table-striped"><tbody>
<tr>
<td><h2>Ferreti IPO Details</h2></td>
<td> </td>
</tr>
<tr>
<td>New Shares Offered</td>
<td style="text-align: right;">40,000,000</td>
</tr>
<tr>
<td>Existing Shares Offered</td>
<td style="text-align: right;">47,000,000</td>
</tr>
<tr>
<td>Greenshoe Option</td>
<td style="text-align: right;">                       8,700,000</td>
</tr>
<tr>
<td>Total Shares Outstanding</td>
<td style="text-align: right;">290,734,954</td>
</tr>
<tr>
<td>Offer as a % of Total Shares Outstanding (incl. greenshoe)</td>
<td style="text-align: right;">33%</td>
</tr>
<tr>
<td>Offer Price (EUR)</td>
<td style="text-align: right;">2.5-3.7</td>
</tr>
<tr>
<td>Offer Period</td>
<td style="text-align: right;">01-10th October</td>
</tr>
<tr>
<td>Price Setting</td>
<td style="text-align: right;">by 15th October</td>
</tr>
<tr>
<td>Trading Date</td>
<td style="text-align: right;">16th October</td>
</tr>
<tr>
<td> </td>
<td style="text-align: right;"> </td>
</tr>
<tr>
<td>IPO Price - Midpoint (EUR)</td>
<td style="text-align: right;">3.1</td>
</tr>
<tr>
<td>Market Capitalisation (EURm)</td>
<td style="text-align: right;">901.3</td>
</tr>
<tr>
<td>Enterprise Value (EURm)</td>
<td style="text-align: right;">976.7</td>
</tr>
</tbody></table><div class="content-caption">Source: Company Disclosures, LSR</div>Ferreti’s revenues have grown over time while the company also has shifted its focus to high-priced, more profitable segments such as manufacturing large-foot yachts. The company currently operates exclusively in the inboard segment of the market and it acquired Wally Yachts in early 2019, through which the company is planning on entering the outboard and sail segments of the market. In terms of the company’s profitability, it has been generating profits over the last three years and we expect the company margins to improve in the next 2-3 years due to a shift in product mix towards high-margin yachts. On the other hand, the company’s borrowings have significantly increased over the last two years while Ferreti also owns its parent EUR211m in debt (not included under debt). We are concerned about the increasing debt position of the company. Ferreti operates in the luxury goods and services market which is not recession proof and thus at the IPO price range, the stock looks overpriced compared to its peers in the luxury goods/service market.Investors are increasingly worrying about another economic downturn as the wealthy have suddenly pulled back their spending on luxury items. Even during the last recession, the order books were healthy and strong at the beginning of the recession, however, there were cancellations and delays which caused a significant decline in the industry’s revenue. The volatile markets and slowdown in global economic growth have caused a decline in luxury spending which puts this IPO at risk of underperformance.We discuss the details below.

The Italian luxury yacht maker, Ferretti SpA (FER IM)  has filed for an initial public offering on the Milan Stock Exchange to raise net proceeds of approximately EUR120m at the midpoint of the IPO price range. The company makes luxury yachts and speedboats under several well-known brands including Wally, Ferreti Yachts, Pershing, Itama and Riva. The company previously traded publicly, however, it was delisted in 2003 and was acquired by private equity firm Weichai Group (China) in 2012. Weichai Group currently owns approximately 86% of the company while Piero Ferrari (through F Investments SA) holds 11.14% of the company. The Chinese group managed to turn around the company into a profitable entity in 2016 while it also helped pay-off the debt.

Ferreti IPO Details
 


New Shares Offered
40,000,000


Existing Shares Offered
47,000,000


Greenshoe Option
                       8,700,000


Total Shares Outstanding
290,734,954


Offer as a % of Total Shares Outstanding (incl. greenshoe)
33%


Offer Price (EUR)
2.5-3.7


Offer Period
01-10th October


Price Setting
by 15th October


Trading Date
16th October


 
 


IPO Price - Midpoint (EUR)
3.1


Market Capitalisation (EURm)
901.3


Enterprise Value (EURm)
976.7

Source: Company Disclosures, LSRFerreti’s revenues have grown over time while the company also has shifted its focus to high-priced, more profitable segments such as manufacturing large-foot yachts. The company currently operates exclusively in the inboard segment of the market and it acquired Wally Yachts in early 2019, through which the company is planning on entering the outboard and sail segments of the market. In terms of the company’s profitability, it has been generating profits over the last three years and we expect the company margins to improve in the next 2-3 years due to a shift in product mix towards high-margin yachts. On the other hand, the company’s borrowings have significantly increased over the last two years while Ferreti also owns its parent EUR211m in debt (not included under debt). We are concerned about the increasing debt position of the company. Ferreti operates in the luxury goods and services market which is not recession proof and thus at the IPO price range, the stock looks overpriced compared to its peers in the luxury goods/service market.Investors are increasingly worrying about another economic downturn as the wealthy have suddenly pulled back their spending on luxury items. Even during the last recession, the order books were healthy and strong at the beginning of the recession, however, there were cancellations and delays which caused a significant decline in the industry’s revenue. The volatile markets and slowdown in global economic growth have caused a decline in luxury spending which puts this IPO at risk of underperformance.We discuss the details below. 

Ferreti Group IPO: Good Business but Sailing in Stormy Economic Seas

Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

Italian luxury shoemaker Tod's reported 23 quarters of consecutive negative SSSG, has seen its share price fall from 142 EUR to 46 EUR during the last six years and is universally hated by sell-side analysts (16 sell ratings, 4 hold ratings, and 0 buy ratings). During 1H19 sales declined for all its brands, across all regions except China and it recorded its first loss since its IPO nearly 20 years ago. Despite this poor operational performance, the share price is up 11% YTD.Among all the negativity one man strongly believes in the brand. He is the founder and main owner of the company: Diego Della Valle. As first communicated in December 2018 he has continued to increase his stake in the company via insider purchases and has indicated he will continue to do so as long as the share price is depressed. Long-term shareholders in Tod's are awarded higher voting rights which means Della Valle owns 64% of the company shares but has over 81% of the voting rights. An investment in Tod's is, more than ever before, a bet on the Della Valle family.Diego is currently 65 years old and virtually his entire net worth is tied up in Tod's stock. It is possible that Delle Valle is on a self-destruction mission and is misjudging the chances to revive Tod's brand. As shareholders, this is the risk of buying Tod's today. The upside is that Della Valle will look out for himself and 1) either he succeeds in turning around Tod's by 2020 or 2) he realizes the turnaround will not work and he will sell Tod's to the highest bidder. Given the depressed enterprise value of the company (2 billion EUR), there should be ample buyers for the brand. <a href="https://www.smartkarma.com/entities/lvmh-moet-hennessy-louis-vuitton" target="_blank" data-smartkarma-citation="entities:21072:1" rel="noopener">Lvmh Moet Hennessy Louis Vuitton (MC FP)</a> remains in pole position to acquire the brand given Bernard Arnault already owns 3.46% of the company.We see virtually no downside (unless financials continue to decline drastically), +50% upside in an earnings recovery story (see my insight from 2017 for details) and 40-70% upside in an M&amp;A scenario.

Italian luxury shoemaker Tod's reported 23 quarters of consecutive negative SSSG, has seen its share price fall from 142 EUR to 46 EUR during the last six years and is universally hated by sell-side analysts (16 sell ratings, 4 hold ratings, and 0 buy ratings). During 1H19 sales declined for all its brands, across all regions except China and it recorded its first loss since its IPO nearly 20 years ago. Despite this poor operational performance, the share price is up 11% YTD.Among all the negativity one man strongly believes in the brand. He is the founder and main owner of the company: Diego Della Valle. As first communicated in December 2018 he has continued to increase his stake in the company via insider purchases and has indicated he will continue to do so as long as the share price is depressed. Long-term shareholders in Tod's are awarded higher voting rights which means Della Valle owns 64% of the company shares but has over 81% of the voting rights. An investment in Tod's is, more than ever before, a bet on the Della Valle family.Diego is currently 65 years old and virtually his entire net worth is tied up in Tod's stock. It is possible that Delle Valle is on a self-destruction mission and is misjudging the chances to revive Tod's brand. As shareholders, this is the risk of buying Tod's today. The upside is that Della Valle will look out for himself and 1) either he succeeds in turning around Tod's by 2020 or 2) he realizes the turnaround will not work and he will sell Tod's to the highest bidder. Given the depressed enterprise value of the company (2 billion EUR), there should be ample buyers for the brand. Lvmh Moet Hennessy Louis Vuitton (MC FP) remains in pole position to acquire the brand given Bernard Arnault already owns 3.46% of the company.We see virtually no downside (unless financials continue to decline drastically), +50% upside in an earnings recovery story (see my insight from 2017 for details) and 40-70% upside in an M&amp;A scenario.

Tod's: Della Valle Family Ups Insider Buying to 64% Ownership; LVMH Remains Logical Final Stop

Equity analyst UK & Europe, UK Long Short

Peter Toeman

Equity analyst UK & Europe

Accelerating Tomorrow’s Independent Research

Boost Research

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Thematic (Sector/Industry)

With just two weeks left before the UK is set to leave the EU, the shape of the arrangements with country's largest trading partners is still to be decided. Imminent political developments will determine whether Brexit is hard, soft, deferred, or aborted.
The UK's principal share index the FTSE 100 is virtually unchanged since we established our Long/Short portfolio a month ago. Results from Lloyds and Centrica have lead to useful outperformance and underperformance respectively. The M&amp;S joint venture with Ocado is judged by investors to have added a lot more value to the latter than the former. We have been wrong-footed by Melrose Industries, but heck, there is always one.
Remembering that no one ever got poor from taking  profits,  we have closed out our long position in Lloyds Banking.  
<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/081/949/original/Capture%201.PNG?1552520300" class="editor-image img-responsive" data-smartkarma-image-id="81949"></figure>
<div class="content-caption">S&amp;P Capital IQ</div>
</div>

With just two weeks left before the UK is set to leave the EU, the shape of the arrangements with country's largest trading partners is still to be decided. Imminent political developments will determine whether Brexit is hard, soft, deferred, or aborted.
The UK's principal share index the FTSE 100 is virtually unchanged since we established our Long/Short portfolio a month ago. Results from Lloyds and Centrica have lead to useful outperformance and underperformance respectively. The M&amp;S joint venture with Ocado is judged by investors to have added a lot more value to the latter than the former. We have been wrong-footed by Melrose Industries, but heck, there is always one.
Remembering that no one ever got poor from taking  profits,  we have closed out our long position in Lloyds Banking.  


S&amp;P Capital IQ


Chief Economist

Diana Choyleva

Enodo Economics

Enodo Economics is an independent macroeconomic forecasting company that untangles complexity, challenges the consensus, and makes sense of the future. Our focus is on China – one of the most misunderstood economies in the world, but one of the most important to figure out.  Enodo’s chief economist, Diana Choyleva, has been analysing China for almost 20 years, while Enodo’s team boasts a combined 140 years’ experience covering China’s economy, politics and markets. 

Macroeconomics

<h2>China News That Matters</h2>
<ul>
<li>Two to tango in Buenos Aires?</li>
<li>Equities slide; foreigners want in</li>
<li>Records fall yet consumer caution rises</li>
<li>Censors tighten grip amid tech boom</li>
</ul>
<div class="content-remarks">
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.
</div>

China News That Matters

Two to tango in Buenos Aires?
Equities slide; foreigners want in
Records fall yet consumer caution rises
Censors tighten grip amid tech boom


In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.


Trade War/China Stocks/ Consumers & Singles’ Day/Tech Worries

Almost one year ago I highlighted the attractiveness of Italian luxury shoemaker Tod's in following insight <a href="https://www.smartkarma.com/insights/tod-s-not-likely-a-standalone-business-for-much-longer-lvmh-is-a-logical-buyer" target="_blank" data-smartkarma-citation="insights:15235">Tod's: Not Likely a Standalone Business For Much Longer; LVMH Is a Logical Buyer</a>. My analysis showed that the company would either: a) succeed in its turnaround under new management or b) be acquired by a larger luxury conglomerate such as <a href="https://www.smartkarma.com/entities/21072" target="_blank" data-smartkarma-citation="entities:21072:1">Lvmh Moet Hennessy Louis Vuitton (MC FP)</a>.
Last week, an Italian newspaper reported on some interesting developments which make the second scenario of a trade sale more plausible. While the company has come out and denied the speculation the underlying trend of smaller luxury brands being absorbed by larger conglomerates is unstoppable as recently highlighted by the sale of Versace to Michael Kors for 2.1 billion USD.
Tod's, as an independent company, remains on its last legs and shareholders will benefit significantly in any M&amp;A scenario. Risk/reward therefore remains highly attractive.

Almost one year ago I highlighted the attractiveness of Italian luxury shoemaker Tod's in following insight Tod's: Not Likely a Standalone Business For Much Longer; LVMH Is a Logical Buyer. My analysis showed that the company would either: a) succeed in its turnaround under new management or b) be acquired by a larger luxury conglomerate such as Lvmh Moet Hennessy Louis Vuitton (MC FP).
Last week, an Italian newspaper reported on some interesting developments which make the second scenario of a trade sale more plausible. While the company has come out and denied the speculation the underlying trend of smaller luxury brands being absorbed by larger conglomerates is unstoppable as recently highlighted by the sale of Versace to Michael Kors for 2.1 billion USD.
Tod's, as an independent company, remains on its last legs and shareholders will benefit significantly in any M&amp;A scenario. Risk/reward therefore remains highly attractive.

Tod's: After Sale of Versace to M. Kors One of Few Luxury Companies Remaining; LVMH Is Likely Buyer

United Kingdom

Burberry Group PLC is a global luxury brand with British heritage, core outerwear, and large leather goods base. The Company designs and sources apparel and accessories, selling through a diversified network of retail, digital, wholesale, and licensing channels worldwide.

Price Gauge
52-week Range	0.00 - 0.00
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P/E	0.00
Dividend (Yield)	0.00

Burberry (BRBY LN)

Ferreti Group IPO: Good Business but Sailing in Stormy Economic Seas

The Italian luxury yacht maker, Ferretti SpA (FER IM) has filed for an initial public offering on the Milan Stock Exchange to raise net proceeds...

Shifara Samsudeen, FCMA, CGMA

Tod's: Della Valle Family Ups Insider Buying to 64% Ownership; LVMH Remains Logical Final Stop

Italian luxury shoemaker Tod's reported 23 quarters of consecutive negative SSSG, has seen its share price fall from 142 EUR to 46 EUR during the...

Nicolas Van Broekhoven

FTSE 100 Long/Short: Beginner's Luck

With just two weeks left before the UK is set to leave the EU, the shape of the arrangements with country's largest trading partners is still to be...

Boost Research

Trade War/China Stocks/ Consumers & Singles’ Day/Tech Worries

China News That Matters Two to tango in Buenos Aires? Equities slide; foreigners want in Records fall yet consumer caution rises Censors tighten...

Diana Choyleva

Tod's: After Sale of Versace to M. Kors One of Few Luxury Companies Remaining; LVMH Is Likely Buyer

Almost one year ago I highlighted the attractiveness of Italian luxury shoemaker Tod's in following insight Tod's: Not Likely a Standalone Business...

Nicolas Van Broekhoven

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52-week Range

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