Author Topic: FCAU - Fiat Chrysler Automobiles  (Read 834759 times)

DTEJD1997

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2770 on: October 10, 2018, 02:31:56 PM »
Hey all:

Assuming that there is not another economic collapse, FCAU has entered "silly" valuation territory.  This is especially so if they spin off Magnetti-Marreli at anything like what is expected.

EV/EBIDTA is something like 2.5.  What will that be like a year from new with Magnetti spun off and some more earnings made?

I just don't get it, so I bought some today...not at the low, but close to it.

We will see what happens!


mwtorock

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2771 on: October 10, 2018, 05:49:07 PM »
Hey all:

Assuming that there is not another economic collapse, FCAU has entered "silly" valuation territory.  This is especially so if they spin off Magnetti-Marreli at anything like what is expected.

EV/EBIDTA is something like 2.5.  What will that be like a year from new with Magnetti spun off and some more earnings made?

I just don't get it, so I bought some today...not at the low, but close to it.

We will see what happens!

agree it is undervalued here, but i think market expectation for Magnetti was higher than what is reported i guess. a lot of silly things happen in the market.

TwoCitiesCapital

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2772 on: October 10, 2018, 06:41:22 PM »
Hey all:

Assuming that there is not another economic collapse, FCAU has entered "silly" valuation territory.  This is especially so if they spin off Magnetti-Marreli at anything like what is expected.

EV/EBIDTA is something like 2.5.  What will that be like a year from new with Magnetti spun off and some more earnings made?

I just don't get it, so I bought some today...not at the low, but close to it.

We will see what happens!

Agreed. I am rolling my Jan 2019 options forward and have increased my holdings by about 40-50% following the dips below $17 that have been occurring.

DTEJD1997

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2773 on: October 10, 2018, 08:13:53 PM »
hey all:

I just went to check the maths on FCAU...and could things be even sillier than I thought?

FCAU market cap is about $25BB.  Debt is about $19BB, cash is about $16BB...so Enterprise Value is about $28BB.

Sell off Magnetti/Marelli for $6BB (cash & assumption of debt), enterprise value is now about $22BB.

Run the new company for about a year, EBIDTA is about $11 to $14 Billion.  What then happens with all that cash flow?  I don't care how capital intensive the car industry is, FCAU won't spend anywhere near that...maybe capital expenditures of $7BB?  $8BB at the most (Magnetti/Marreli is now gone, lower expenditures)?

So we've got free cash flow of a minimum of 10%  perhaps even approaching 20%

Company should have plenty of cash & line of credit to make it through all but the most severe of downturns...

What happens if Maserrati is spun off, what happens if Jeep/Truck sales continue to improve?  Not a ton of stuff has to go right and FCAU is simply making tons of cash.

vinod1

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2774 on: October 11, 2018, 04:01:05 AM »
hey all:

I just went to check the maths on FCAU...and could things be even sillier than I thought?

FCAU market cap is about $25BB.  Debt is about $19BB, cash is about $16BB...so Enterprise Value is about $28BB.

Sell off Magnetti/Marelli for $6BB (cash & assumption of debt), enterprise value is now about $22BB.

Run the new company for about a year, EBIDTA is about $11 to $14 Billion.  What then happens with all that cash flow?  I don't care how capital intensive the car industry is, FCAU won't spend anywhere near that...maybe capital expenditures of $7BB?  $8BB at the most (Magnetti/Marreli is now gone, lower expenditures)?

So we've got free cash flow of a minimum of 10%  perhaps even approaching 20%

Company should have plenty of cash & line of credit to make it through all but the most severe of downturns...

What happens if Maserrati is spun off, what happens if Jeep/Truck sales continue to improve?  Not a ton of stuff has to go right and FCAU is simply making tons of cash.

In calculating EV, you need to deduct "excess cash" (not all cash) as the logic is that if you own the company you can take it all out. Here, that is not the case.

Also, you are ignoring the €8 - €9 billion in unfunded pension and OPEB liabilities. This needs to be added back to EV.

Vinod
The fundamental algorithm of life: repeat what works. –Charlie Munger

Homestead31

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2775 on: October 11, 2018, 07:23:41 AM »
what happens if they start filing 10Ks in the US instead of 20Fs?

cmlber

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2776 on: October 11, 2018, 08:00:51 AM »
hey all:

I just went to check the maths on FCAU...and could things be even sillier than I thought?

FCAU market cap is about $25BB.  Debt is about $19BB, cash is about $16BB...so Enterprise Value is about $28BB.

Sell off Magnetti/Marelli for $6BB (cash & assumption of debt), enterprise value is now about $22BB.

Run the new company for about a year, EBIDTA is about $11 to $14 Billion.  What then happens with all that cash flow?  I don't care how capital intensive the car industry is, FCAU won't spend anywhere near that...maybe capital expenditures of $7BB?  $8BB at the most (Magnetti/Marreli is now gone, lower expenditures)?

So we've got free cash flow of a minimum of 10%  perhaps even approaching 20%

Company should have plenty of cash & line of credit to make it through all but the most severe of downturns...

What happens if Maserrati is spun off, what happens if Jeep/Truck sales continue to improve?  Not a ton of stuff has to go right and FCAU is simply making tons of cash.

In calculating EV, you need to deduct "excess cash" (not all cash) as the logic is that if you own the company you can take it all out. Here, that is not the case.

Also, you are ignoring the €8 - €9 billion in unfunded pension and OPEB liabilities. This needs to be added back to EV.

Vinod

Vinod, if you add back underfunded pension & OPEB you are double counting, as they expense the interest cost on the underfunding through the income statement unlike GM.  So if you're going to add it back to EV, you also need to add €400MM+ to EBIT.  The actual cash contributions to the pension are less than the expense on the P&L.

Hypothetically, if they decided to never spend another dollar on R&D or capex, how long do you think they could keep selling the existing lineup before sales dry up?  Let's call it 3yrs.  That would produce ~€45B in cash flow.  Add back the €4B year-end 2018 net cash, deduct €10B for negative working capital unwind and €9B for underfunded pension, that leaves us with €30B in cash to distribute to shareholders on a Mkt Cap of €22-23B after MM sale.  Obviously I don't expect them to liquidate the company, but that seems like a pretty decent margin of safety to me.

Shooter MacGavin

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2777 on: October 11, 2018, 09:38:36 AM »
hey all:

I just went to check the maths on FCAU...and could things be even sillier than I thought?

FCAU market cap is about $25BB.  Debt is about $19BB, cash is about $16BB...so Enterprise Value is about $28BB.

Sell off Magnetti/Marelli for $6BB (cash & assumption of debt), enterprise value is now about $22BB.

Run the new company for about a year, EBIDTA is about $11 to $14 Billion.  What then happens with all that cash flow?  I don't care how capital intensive the car industry is, FCAU won't spend anywhere near that...maybe capital expenditures of $7BB?  $8BB at the most (Magnetti/Marreli is now gone, lower expenditures)?

So we've got free cash flow of a minimum of 10%  perhaps even approaching 20%

Company should have plenty of cash & line of credit to make it through all but the most severe of downturns...

What happens if Maserrati is spun off, what happens if Jeep/Truck sales continue to improve?  Not a ton of stuff has to go right and FCAU is simply making tons of cash.

In calculating EV, you need to deduct "excess cash" (not all cash) as the logic is that if you own the company you can take it all out. Here, that is not the case.

Also, you are ignoring the €8 - €9 billion in unfunded pension and OPEB liabilities. This needs to be added back to EV.

Vinod

Vinod, if you add back underfunded pension & OPEB you are double counting, as they expense the interest cost on the underfunding through the income statement unlike GM.  So if you're going to add it back to EV, you also need to add €400MM+ to EBIT.  The actual cash contributions to the pension are less than the expense on the P&L.

Hypothetically, if they decided to never spend another dollar on R&D or capex, how long do you think they could keep selling the existing lineup before sales dry up?  Let's call it 3yrs.  That would produce ~€45B in cash flow.  Add back the €4B year-end 2018 net cash, deduct €10B for negative working capital unwind and €9B for underfunded pension, that leaves us with €30B in cash to distribute to shareholders on a Mkt Cap of €22-23B after MM sale.  Obviously I don't expect them to liquidate the company, but that seems like a pretty decent margin of safety to me.

that's a great way of looking at the downside.

Snorky

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2778 on: October 11, 2018, 10:30:43 AM »
That is a good way, but not a great way, to look at the downside. The real downside is that the company is burning cash through expenses like R&D and not get rewarded for it.
Not that i think it will happen, I’m long on the stock, but the liquidation scenario is obv not likely and not the worst case scenario.
But well calculated and interesting thought.

Snorky

whatdadil9

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2779 on: October 11, 2018, 10:42:51 AM »
The pension and OPEB add back is closer to 1.7bn eur ebit.. .if you are capitalizing all 8. also 100 bps is 3bn is underfundedness eliminated.