Author Topic: EXO.MI - EXOR  (Read 56124 times)

Sportgamma

  • Sr. Member
  • ****
  • Posts: 485
    • Fundamental Finance Playbook
EXO.MI - EXOR
« on: May 11, 2013, 07:23:23 PM »
Indithinker85 asked me to share my thesis on Exor.

Its an idea that has already been discussed to some extent in the FIAT thread. But I´ll start with this



Phaceliacapital

  • Hero Member
  • *****
  • Posts: 1004
Re: EXO.MI - EXOR
« Reply #1 on: May 11, 2013, 10:30:03 PM »
I think this is also a good slide to show your reasoning:

The harder you work, the luckier you get.

Packer16

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3180
  • Go Riders Go! Go Pack Go!
Re: EXO.MI - EXOR
« Reply #2 on: May 12, 2013, 05:27:42 AM »
What are the upside numbers based up and what date is in the information based upon?  TIA

Packer

Sportgamma

  • Sr. Member
  • ****
  • Posts: 485
    • Fundamental Finance Playbook
Re: EXO.MI - EXOR
« Reply #3 on: May 12, 2013, 07:25:13 AM »
What are the upside numbers based up and what date is in the information based upon?  TIA

Packer

Date of information
Equity method and fair value numbers are from AR2012, market cap numbers are up to date.
Cash, financial investments and debt are from 1Q2013 and share count is per latest news release on share repurchases by EXOR.

FIAT: assumes an intrinsic value of €12 per share, reasoning to be found on the FIAT thread.

Fiat Ind.: Assumes an intrinsic value of about €10 per share, the reasons being:
1. Combined NewCo will be easier to value (a)
2. NYSE listing will offer more liquidity and eliminate "periphery" (since when did Italy become the periphery?) discount
3. Merger should lower the cost of capital / debt funding (b)
4. FI tax rate of 39% should fall to CNH´s 35% as NewCo moves to the Netherlands (c)

(a)
Quote
After CNH’s report on Tuesday, the stock fell over 9% to $41. This was primarily due to a weak report and guidance from its parent, Fiat Industrial, whose shares dropped as well.

Why should this affect CNH? Until the takeover is complete this year, CNH shares basically trade in lockstep with Fiat Industrial given that CNH’s value is determined by the established exchange ratio of 3.8 for the minority stake.

Most analysts believe that Fiat already trades at a steep discount and that this turn of events should not affect CNH shares for long. Combined with the fact that CNH is trading at roughly 8 times 2013 estimates, it might pay to buy this dip.
http://www.forbes.com/sites/zacks/2013/05/10/make-tracks-into-cnh-global/?partner=yahootix

(b)
Quote
What’s the synergy value? Our synergy value at the end of the day is the drive-train by having a global integrated group that’s sharing the technology and the drive-train is really the number one linchpin between the individual businesses. So I think that it’s – and then you get other counter-cyclical elements within the portfolio. So there’s a variety of different operational benefits, I mean there’s no real restructuring opportunity and your cost take out opportunity because overall between Fiat Industrial and CNH we run relatively lean now. And then there’s the all, the softer issues in terms of capital structuring and depth of liquidity and everything else. So you’ve got that side of it also, but operationally it’s just the further integration and the harmonization of the drive train between the different segments.
CNH´s Tobin on CC (http://seekingalpha.com/article/1385841-cnh-global-s-ceo-discusses-q1-2013-results-earnings-call-transcript?page=4&p=qanda&l=last)

(c) http://www.borsaitaliana.it/documenti/studi.htm?filename=97763.pdf

C&W: Hard to find comparisons (this report uses a 8.2 multiple on a depressed EBIDTA, page 12: http://www.borsaitaliana.it/mediasource/star/db/pdf/87267.pdf)

C&W           $M FY2012   Multiple   Fair value   EXO share
EBIT                      70         11.1             777.0   538
EBITDA             128              6.1          780.8   540

http://www.cushwake.com/cwglobal/jsp/newsDetail.jsp?Country=GB&Language=EN&repId=c59200006p

Juventus: Value based on Liverpool transaction (John Henry) and Forbes value estimates. Numbers look bad, but they (1) reflect on past, (2) new stadium is a game changer (first Italian club to own stadium) that offers alternative sources of revenue, (3) football club thesis is basically based on a greater fool theory.

http://sportgamma.net/2010/10/17/market-value-of-juventus-shares/
http://sportgamma.net/2011/03/12/juve-reevaluating-the-original-thesis/
http://swissramble.blogspot.com/search/label/Juventus
« Last Edit: May 12, 2013, 07:35:14 AM by Sportgamma »

Green King

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 756
Re: EXO.MI - EXOR
« Reply #4 on: May 12, 2013, 11:46:26 AM »
SGS SA look over valued do you mind walking through your valuation for it ?
GK

Sportgamma

  • Sr. Member
  • ****
  • Posts: 485
    • Fundamental Finance Playbook
Re: EXO.MI - EXOR
« Reply #5 on: May 12, 2013, 04:21:39 PM »
SGS SA look over valued do you mind walking through your valuation for it ?

I agree that from almost any angle they look pretty handsomely priced. The TIC industry has a high EV/EBITDA multiple in general. The reasons being:
- High cash generation
- Entry barriers
- Its still a fragmented market (but is consolidating rapidly)
- Economic and competitive benefits of scaling and synergies (a)
(a)
Quote
“TIC sector expertise, knowledge and skills can be leveraged across different geographical regions. Newly acquired services / skills can be redeployed across the network international” Intertek

Hence the acquisition rampage. Because its kind of hard to see which expenses are normalised and which are expansion related, I guess the market is mainly looking at revenues and betting on improving profit margins once the acquisitions and other new business are integrated. 

Regarding valuation, 2012 EBITDA was around CHF 1.100M, so to get at the current share price of 2.292, the EV/EBITDA multiple has to be around 17 (albeit backward looking)...but they are targeting CHF 8.000M in revs in 2014 with a 20% operating margin (currently at 15,6%), which would correspond to a multiple of 11.5 on current EV. 

How to value a TIC company:
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&sqi=2&ved=0CDUQFjAC&url=http%3A%2F%2Fwww.aegic.es%2Fponencias%2Fdoc_download%2F370-ceoc-2012-ponencia-robbert-claassen.html&ei=ZRWQUa28IMWc0AWrp4CwDw&usg=AFQjCNE2aL_2BnENUShnX5fSnfekeI2RAg&bvm=bv.46340616,d.d2k

From Vontobel most recent analyst report (feb 13):
Quote
Power of growth initiatives underestimated? Possible EPS FY14E upgrades to up to 20%
In 2010, SGS set ambitious targets for 2014, implying 11.3% organic growth and CHF 700 mn additional sales through acquisitions. The margin target is set at 19.5% with free cash flow at 15-17% of sales. Market expectations are well below these 2014 targets, reflecting high single digit organic growth and zero impact from acquisitions in FY13 and FY14, and a margin of 18.2%. However, based on SGS's guidance, EPS could increase by more than 20% by 2014.

M&A activity accelerating further - already CHF 50 mn annualized sales YTD
Last year, external growth exceeded 4% and management expects to exceed this level in the current year. The TIC market is still highly fragmented and offers plenty of consolidation opportunities. Considering SGS's value creation with acquisitions, management has maintained stringent financial discipline with regard to M&A.

Fair value of CHF 2,595 - SGS trading at EV/NOPLAT 14E of 18.1x, representing a 15% discount to peers Bureau Veritas and Intertek - not justified in our view
Based on P/E 14E multiples, SGS trades roughly in line with Bureau Veritas and Intertek, vs an average premium of 15% in recent years. On an EV/EBITDA basis, SGS trades at a 12% discount to Bureau Veritas and in line to Intertek vs average historical premiums of 2% and 10%, respectively, in recent years. We also compare the three companies based on EV/NOPLAT multiples, where SGS has a clear discount to peers, which is unjustified. While SGS trades at EV/NOPLAT 2014E of 18.1x, Bureau Veritas trades at 21.x and Intertek at 20.2x.

Buy Rating confirmed - new price target CHF 2,550 (vs CHF 2,300), 15% upside
Following a sharp rally since the announcement of the FY12 results, the share price has neared our PT of CHF 2,300. Considering the short term improving environment, the mid􏰀 term structural growth drivers and SGS's leading position, we believe that it is set to deliver ongoing strong growth and improved ROIC. Our various valuation methods also imply significant upside. We therefore confirm our Buy rating and set a new price target of CHF 2,550 (from CHF 2,300), indicating upside of more than 15%.
« Last Edit: May 12, 2013, 04:24:04 PM by Sportgamma »

Sportgamma

  • Sr. Member
  • ****
  • Posts: 485
    • Fundamental Finance Playbook
Re: EXO.MI - EXOR
« Reply #6 on: May 14, 2013, 10:44:14 AM »
Longleaf International fund Management discussion:
FIAT industrial 2.6% of assets
EXOR  2.4%
CNH  0.9%

Quote
Exor, the Agnelli family holding company led by Chairman and CEO John Elkann, owns public stakes in competitively positioned businesses, including Fiat Industrial, Fiat Auto, and SGS. Management has opportunistically bought in shares at a discount and is focused on driving value creation at Exor’s underlying businesses. Elkann sits on the boards of Fiat Auto and Fiat Industrial and appointed Sergio Marchionne to oversee the restructuring of these two businesses. We also bought Fiat Industrial, a global leader in agriculture machinery and commercial truck manufacturing. Over 60% of profits come from North and South America through its 88% stake in agricultural equipment business CNH Global. CNH has a comprehensive product offering with a strong distribution network in an oligopolistic industry with pricing power. Fiat Industrial is in the process of merging with the remainder of CNH Global and plans to list the company on the NYSE and move from Italy to the Netherlands to lower its cost of capital and reduce taxes. After we initiated our position in Fiat Industrial, CNH became a cheaper entry point to purchase the same assets. We bought a 1% position in CNH, which we view as a single position with Fiat Industrial.

http://www.longleafpartners.com/quarterly_reports/Longleaf123112.PDF

muscleman

  • Hero Member
  • *****
  • Posts: 3364
Re: EXO.MI - EXOR
« Reply #7 on: May 17, 2013, 11:59:20 AM »
http://www.exor.com/uploads/789059-Assemblea_Straord_e_Ord_ENG.pdf

From OTC, I can only find EXOPF, which is the preferred shares of EXO. Since it will be converted to ordinary shares 1:1, it looks to be the only way to own EXO then?
My 401k account does not allow me to buy international stocks.
I am muslceman. I have more muscle than brain!

Sportgamma

  • Sr. Member
  • ****
  • Posts: 485
    • Fundamental Finance Playbook
Re: EXO.MI - EXOR
« Reply #8 on: May 30, 2013, 07:15:18 AM »
Investor and analyst conference call slides from today:
http://www.exor.com/uploads/551537-EXOR%20conference%20call%2020130530_FINAL.pdf

muscleman

  • Hero Member
  • *****
  • Posts: 3364
Re: EXO.MI - EXOR
« Reply #9 on: May 30, 2013, 08:25:58 AM »
Investor and analyst conference call slides from today:
http://www.exor.com/uploads/551537-EXOR%20conference%20call%2020130530_FINAL.pdf

Looks like the NAV has increased to 8.9 bn Euros! :)
The preferred and savings will be converted to common 1:1, so total market cap for EXO is currently 6.1 bn, so it is trading at 68% of NAV.

Do you know normally the discount to NAV for a holding company like this? I think they can easily create shareholder value simply by buying back shares.
I am muslceman. I have more muscle than brain!