PARTNERS. Equity Update. 2011, August 8. Rating: BUY TAMBURI INVESTMENT. Sector: Investment Company

Transcription

1 2011, August 8 Equity Update Sector: Investment Company Rating: BUY TAMBURI INVESTMENT PARTNERS Old New Rating BUY BUY Risk Rating Medium Medium Target ( ) 2,1 2,1 Market Data ( ) Target Price ( ) 2,1 Close Price ( ) 1,50 Share Outstanding (m) 133,9 Market Cap. ( /m) 201,1 Market Float (%) 49,9 Avg daily Vol. (000s) 88,2 Past 12 Months Max 1,59 Min 1,34 Performance 3 M 12 M Absolute 2,5 16,5 Relative 26,3 47, /08/10 17/08/10 31/08/10 1H11 results are able to underpin our FY11F and in line with our forecast. Unchanged our forecast. 1H results could give a misleading idea on both economic and financial trend and evolution of the activity on an annual basis. Thus, we prefer to concentrate our attention on investments, portfolio quality and advisory operations. As far as the first seven months are concerned, TIP invested c mln. The most important ones were Prysmian (through ClubTre) and IMA. During 2Q11, TIP double its investment in Noemalife (reaching 5.85% stake from 2.8%) and slightly increased its stake in Bolzoni. At the end of July TIP also invested in Intercos Group. Intercos Group operation. At the end of July, TIP invested about c. 9 mln in DAFE 4000 SpA, one of the holding companies that owned Intercos Group (one of the most important worldwide player in the research, development and production of make-up products for cosmetic industries). During 2010 Intercos generated revenues of c. 245 mln, while during 1H11 sales grew by more than 15% YoY. TIP s management don t exclude to further increase its stake in DAFE 4000 SpA. Strong increase of net equity. During 1H11, TIP was also able to further strength its net equity to 205 mln (from mln of TIP S.p.A. separate financial statements as at December 31, 2010 and mln of consolidated figure at the same date) thanks to the activity to increase in equity during the period, that testifies the quality of the investments portfolio. High portfolio quality = low risk. In the portfolio quality view, we would stress that TIP s portfolio includes eigth world leaders (Amplifon, Bolzoni, Datalogic, IMA, Interpump, Prysmian, Zignago Vetro, Intercos Group) that are able to strongly reduce the entire portfolio volatility (risk). During the last month for example, TIP s portfolio value volatility was one quarter of the market one. Last but not least, the possibilities to realize strong capital gain from: 14.8% stake in Borletti/Printemps Group Finance SCA (we forecast 25 mln); NH operation, thanks to the agreement between NH and the Chinese airline and logistic group, HNA, Intercos Group. Liquidity of mln. Liquidity available for investments, meaning 24.7 mln existing at 1H11, 60 mln as a commitment for bonds and shares, 20 mln credit line and mln in the event of warrant exercise until 2013, give a misleading idea of possible investment that TIP are able to activate thanks to its ability to structure club deals and balance it using financial equity leverage. Moreover. TP at 2.1, BUY rating and medium risk unchanged. Portfolio update imply an equity value of 1.83 per share (the same fully diluted), unchanged in comparison with our note of 24 May. We prudentially value the nonlisted shares 30 mln (without majority premium and Printemps/Borletti capital gain). Since the quotation, TIP demonstrates strong attention to its shareholders, distributing more about 30 mln as a whole ( 22 mln of dividends, 8 mln of buy backs and free capital increase). We calculate that the average IRR is 3.9% (8.6% considered only last year). To include the intangible value (meaning the strong shareholders network, the international advisory network, management skills, etc.), we apply a prudential premium of 15% to our equity value, reaching 2.1 per share. As far as the listed companies we underline lower portfolio volatility (risk) compare to the market. In other words we believe investment in TIP could be viewed as a total return portfolio investment plus an extra yield coming from the extraordinary gains of non listed shares, in which total business risks is lower than the market ones thanks to the good mix of intangibles as a whole we highlighted before. Thus, we maintain our Buy rating, and 2.1 target price. 14/09/10 28/09/10 12/10/10 26/10/10 9/11/10 23/11/10 FTSE MIB 7/12/10 21/12/10 4/01/11 18/01/11 1/02/11 Tamburi Investment Partner 15/02/11 1/03/11 15/03/11 29/03/11 12/04/11 26/04/11 10/05/11 24/05/11 7/06/11 21/06/11 5/07/11 19/07/11 2/08/11 Antonio Tognoli antonio.tognoli@integrae.it

2 Recent operation At the end July, TIP signed an agreement to buy a stake of c.16,7% of Dafe S.p.A, one of the holdings through which the Ferrari family controls Intercos Group. Intercos Group is one of the most important players worldwide in the research, development and production of make-up products for the main international operators involved in the cosmetic industry. The Group is specialized in the full outsourcing of colour cosmetics (so called make-up ) and it is the operator which, in the last years, made the biggest investments worldwide in research, development and innovation, creating its own formulations and a portfolio of highly innovative products. Intercos Group employs approximately 3,150 people all over the world, of which over 450 dedicated to the innovation/r&d, it has 2 research centers in Europe specialized in raw materials and high technology active ingredients, operates through 11 production plants located in 3 continents and over 8 sale offices geographically close to main clients, in the most strategically important markets (US, France, UK, Russia, Spain, Germany, Japan, Australia). According to TIP s press release, during FY10 Intercos Group generated revenues of c. 245 mln, with a strong growth over FY09. In 1H11 total sales grew by more than 15% compared to the first semester We forecast that Intercos Group s sales could reach 280 mln in FY11F, 300 mln, in FY12 and 340 mln in FY13F. We value in a positive way Intercos Group operation because: is in line with TIP s strategy to gradually increase its portfolio investments in companies world/european leader in their respective markets; potential capital gain and of course total return from investment, coming from the operation in two/three years could be very interesting, especially if Intercos Group could start again the process to list its shares (the first one was in 2005). Our assumptions are based on 2011F EV/Sales ratio (2.1x, source Infinancials) of companies sample operating in the same sector (including among others, Beiersdorf AG, Estee Lauder Co, L Oreal, Shiseido, Colgate Palmolive, Oriflame Cosmetics S.A.). With Intercos Group, TIP s portfolio includes 8 international leader companies for a total value of 140mln (price of 4 August), meaning 57% of its total NAV (according to our forecast). Printemps Value In our note of 2011, May 24, we highlighted TIP s possibility to realize strong capital gain from the disposal of its 14.8% of Borletti Group Finance SCA which owns (through Borletti Group SCA), 30% stake in Printemps, the leading French in the department store sector specialized in the high-end market. Our assumptions were made on Printemps Boulevard Hausmann real Tamburi 2 Investment Partners 2011, August 8 - pag. 2

3 estate value of 990 mln and price that CRC offered for La Rinascente operating company. La Rinascente operation has been signed at the end of July for a total amount of 260 mln, which imply a 2010 EV/EBITDA of 11.0x. We prudentially do not upgrade the ratio to taking into account the different place of Printemps. Thus, based on the same ratio and according to our forecast, Printemps value of the operating company results 462 mln, so that Printemps enterprise value results of mln, meaning an equity value of 750 mln. According to our forecasts and assumptions, TIP s pro-quota value in Printemps accounts for 33 mln, meaning a capital gain on 25 mln (based on Borletti Group Finance SCA book value at 2011, June 30). The advisory activity A far as the advisory activity is concerned, TIP s management said that during 1H11 it has been considerable, even if the economic results from it were not commensurate to the efforts due to difficulties encountered in finalizing mergers & acquisitions deals, still characterized by a strong mismatch between sellers expectations and buyers demand, in particular in these historic times of uncertainty. Still the uncertainty about the possibilities to finalizing M&A operations (in negative but also in positive view), we do not change our 2011F forecast. Tamburi 3 Investment Partners 2011, August 8 - pag. 3

4 Fig. 1 TIP s investment portfolio valuation Assets No. Shares % Stake Price as of Valore Totale Valuation Methodology 5-Aug m Bolzoni ,1% 2,10 2,9 1,2% Market price D'amico International Shipping ,3% 0,73 0,3 0,1% Market price Datalogic ,4% 6,18 23,1 9,4% Market price M&C (TIP) ,5% 0,22 3,6 1,5% Market price Amplifon ,0% 4,31 38,3 15,6% Market price Monrif ,6% 0,36 4,1 1,7% Market price NH Hotels 1) ,5% 3,81 3,8 1,5% Market price Noemalife ,8% 5,58 1,4 0,6% Market price Servizi Italia ,7% 5,18 1,4 0,6% Market price IMA ,5% 14,10 2,8 1,1% Market price Valsoia ,3% 4,32 1,1 0,4% Market price Zignago Vetro ,0% 5,26 4,2 1,7% Market price Total direct listed activities (a) 86,9 35,3% Interpump (IPG Holding) ,9% 5,46 16,5 6,7% NAV - market price Bee Team (Data Holding) ,7% 0,42 4,6 1,9% NAV - market price Prysmian (ClubTre) ,0% 11,90 44,0 17,9% NAV - market price Total undirect listed activities (b) 65,1 26,5% Total direct and undirect listed activities (a+b) = c 152,0 61,8% Tamburi & Associaty (Advisory) 100,0% 20,0 8,1% Implied P/E multiple of 11.5x Palazzari ,0% 0,2 0,1% Book Value Dafe 4000 (Intercos SpA) % 8,9 3,6% EV/Sales of 2.1 Non listed acvities (d) 29,1 11,8% Borletti Group SCA (Printemps) (e) 30,0 12,2% Total non listed activities (d+e) = f 59,1 24,0% Total listed and unlisted activities (c+f) = g 211,1 85,8% Cash (Debt) (h) 21,1 8,6% Holding costs (i) -6,0-2,4% TOTALE NAV (g+h+i) = l 226,2 92,0% Interpump premium (30%) 8,0 3,3% Bee Team premium(30%) 8,3 3,4% Intercos SpA potential capital gain 3,4 1,4% Total control premium and capital gain (m) 19,8 8,0% Total NAV (l+m) 246,0 100,0% No. Shares 134,8 NAV per share 1,83 Source: Integrae SIM on TIP Data; 1) our forecast No of shares are net of Treasury shares Fig. 2 Premium on NAV Data Nav per share (Base) 1,83 Premium of 10% 2,01 Premium of 15% 2,10 Premium of 20% 2,19 Premium of 25% 2,28 Premium of 30% 2,38 Source: Integrae SIM forecast Tamburi 4 Investment Partners 2011, August 8 - pag. 4

5 Fig. 3 Main Data P&L Account ( mln data) F 2012F Revenues 3,56 6,12 6,50 8,00 EBITDA -0,65 0,42-1,00-1,10 EBIT -0,75 0,38-1,10-1,20 Financial revenues 6,31 9,48 7,00 10,00 Financial charges -4,61-2,05-0,50-1,00 Result before extraordinary items 0,95 7,81 5,40 7,80 Share profit of equity-accounted investments 0,72 1,07 0,30 0,60 Income from business combinations 0,00 2,35 0,00 0,00 Extraordinary Items -0,13-0,05 0,00 0,00 Pre-tax profit 1,54 11,18 5,70 8,40 A&L main figures ( mln data) F 2012F Net invested capital 112,0 156,1 152,0 165,0 Financial (debt)/cash (1) 37,1 41,6 42,0 42,0 Shareholders' equity 149,1 197,7 201,5 207,1 Main Ratios Dividend ( ) 0,03 0,035 0,035 0,04 P/PN (x) 1,291 0,974 0,955 0,929 Dividend Yield (%) 2,09% 2,43% 2,43% 2,78% Adjusted ROCE (%) 0,92% 3,81% 2,51% 3,41% Figures 2009 are not consolidated. Source: TIP and Integrae SIM forecast Tamburi 5 Investment Partners 2011, August 8 - pag. 5

6 Disclosure Pursuant to Article 69 ET SEQ. of Consob (Italian Securities % Exchange Commission) Regulation No /1999 Analyst/s certificationn The analyst(s) which has/have produced the following analyses hereby certify/certifies that the opinions expressed herein reflect their own opinions, and that no direct and/or indirect remuneration has been, nor shall be received by the analyst(s) as a result of the above opinions or shall be correlated to the success of investment banking operations. INTEGRAE SPA is comprised of the following analysts who have gained significant experience working for INTEGRAE and other intermediaries: Antonio Tognoli. Neither the analysts nor any of their relatives hold administration, management or advising roles for the Issuer. Antonio Tognoli is current Vice President of Associazione Italiana Analisti Finanziari AIAF, and current Vice President of Associazione Nazionale Private Investment Banking ANPIB. Disclaimer This publication was produced by INTEGRAE SIM SpA. INTEGRAE SIM SpA is licensed to provide investment services pursuant to Italian Legislative Decree n. 58/1998, Resolution n of March 29 th INTEGRAE SIM SpA performs the role of corporate broker for the financial instruments issued by the company covered in this report. INTEGRAE SIM SpA is distributing this report in Italian and in English, starting from the date indicated on the document, to approximately 300 qualified institutional investors by post and/or via electronic media, and to nonqualified investors through the Borsa Italiana website and through the leading press agencies. Unless otherwise indicated, the prices of the financial instruments shown in this report are the prices referring to the day prior to publication of the report. INTEGRAE SIM SpA will continue to cover this share on a continuing basis, according to a schedule which depends on the circumstances considered important (corporate events, changes in recommendations, etc.), or useful to its role as a corporate broker/specialist. The table below, shows Integrae s SIM recommendation, target price and risk issued during the last 12 months: Date Recommendation Target Price Risk Comment 12/7/10 Buy 1,8 Medium Initiating coverage 14/7/10 Buy 1,8 Medium Analysts meeting 6/8/10 Buy 1,8 Medium 1H10 results 2/11/10 Buy 2,0 Medium Portfolio valuation 1/12/10 Buy 2,0 Medium 9M10 results 22/2/11 Buy 2,1 Medium Update 21/3/11 Buy 2,1 Medium Update 24/5/11 Buy 2,1 Medium 1Q11 Results The information and opinions contained herein are based on sources considered reliable. INTEGRAE SIM SpA also declares that it takes all reasonable steps to ensure the correctness of the sources considered reliable; however, INTEGRAE SIM SpA shall not be directly and/or indirectly held liable for the correctness or completeness of said sources. The most commonly used sources are the periodic publications of the company (financial statements and consolidated financial statements, interim and quarterly reports, press releases and periodic presentations). INTEGRAE SIM SpA also makes use of instruments provided by several service companies (Bloomberg, Reuters, JCF), daily newspapers and press in general, both national and international. INTEGRAE SIM SpA generally submits a draft of the analysis to the Investor Relator Department of the company being analyzed, exclusively for the purpose of verifying the correctness of the information contained therein, not the correctness of the assessment. INTEGRAE SIM SpA has adopted internal procedures able to assure the independence of its financial analysts and that establish appropriate rules of conduct for them. This document is provided for information purposes only. Therefore, it does not constitute a contractual proposal, offer Tamburi 6 Investment Partners 2011, August 8 - pag. 6

7 and/or solicitation to purchase and/or sell financial instruments or, in general, solicitation of investment, nor does it constitute advice regarding financial instruments. INTEGRAE SIM SpA does not provide any guarantee that any of the forecasts and/or estimates contained herein will be reached. The information and/or opinions contained herein may change without any consequent obligation of INTEGRAE SIM SpA to communicate such changes. Therefore, neither INTEGRA SIM SpA, nor its directors, employees or contractors, may be held liable (due to negligence or other causes) for damages deriving from the use of this document or the contents thereof. Conflicts of interest, including potential conflicts and related organizational measures are set forth in this disclaimer section. Rating system The BUY, HOLD and SELL ratings are based on the expected total return (ETR absolute performance in the 12 months following the publication of the analysis, including the ordinary dividend paid by the company), and the risk associated to the share analyzed. The degree of risk is based on the liquidity and volatility of the share, and on the rating provided by the analyst and contained in the report. Due to daily fluctuations in share prices, the expected total return may temporarily fall outside the proposed range. Risk Total Return ETR for different risk and rating categories Rating Low Risk Medium Risk High Risk BUY ETR >= 7.5% ETR >= 10% ETR >= 15% HOLD -5% < ETR < 7.5% -5% < ETR < 10% 0% < ETR < 15% SELL ETR <= -5% ETR <= -5% ETR <= 0% U.R. N.R. Rating e/o target price Under Review Stock Not Rated The methods that INTEGRAE SIM SpA prefers to use for value the company under analysis and the Expected Total Return are those which are generally used, such as the market multiples method which compares average multiples (P/E, EV/EBITDA, and other) of similar shares and/or sectors, and the traditional financial methods (DCF, DDM, EVA etc). For financial securities (banks and insurance companies) INTEGRAE SIM SpA tends to use methods based on comparison of the ROE and the cost of capital (embedded value for insurance companies). The estimates and opinions expressed in the publication may be subject to change without notice. Any copying and/or redistribution, in full or in part, directly or directly, of this document are prohibited, unless expressly authorized. Price, target price and rating history (also see table above) in the last 12 months: 2,2 2,1 2 1,9 1,8 1,7 1,6 1,5 1,4 1,3 1,2 07/08/ /10/ /12/ /02/ /04/ /06/2011 Price Target Price Tamburi 7 Investment Partners 2011, August 8 - pag. 7