Geox Extract from Corp. Broking Review

Transcription

1 Geox Extract from Corp. Broking Review Expansion Right on Track. 2Q/1H06 results. 2Q/1H06 results. EUR M 2Q05 2Q06 yoy % 1H05 1H06 yoy % Turnover Gross profit Gross margin (%) EBITDA NM EBITDA margin (%) EBIT NM EBIT margin (%) PBT NM Net profit NM Source: Company data. Sales increased by 34% in 1H06 and by 41% in 2Q06. Comparable store sales growth, excluding the impact of 121 new stores - of which 92 franchisees and 29 DOS - was still up by a solid 9% in 1H06. Gross margin decreased by 360bps in 1H06 and by 210bps if adjusted for the EUR 3.4M extraordinary gains in 1H05. The gross margin pressure reflected an average increase in prices and higher investments to support quality in the third party production plants. Adjusted EBITDA margin decreased by 50bps to 27% as costs efficiencies in selling distribution, overheads and A&P costs partly offset the gross margin decrease. The geographic expansion is on track with management s plan. Europe (excl. Italy) was the main contributor to the group's growth with a 380bps EBITDA margin increase on a 47% top line growth, while Italy showed a +9% sales increase and stable margin at 37.8%. The US reported a strong top line growth albeit from a small base (from EUR 4.8M to EUR 9.1M) and increased its losses from EUR 2.3M EBITDA loss to EUR 3.0M in 1H06 due to higher investments to support the top line growth. Net profit was only up by 8% as it was impacted by a higher tax rate of 34% in 1H06 vs. 29.3% in 1H05 partially explained by a change in the amortisation period of the trademarks deriving from a recently approved Italian law. The 1H06 net cash position of EUR 62.2M, was in line with expectations, vs. EUR 48.4M in FY05 and EUR 23.8M in 1H05 despite EUR 11M capex for new openings (EUR 30M expected for FY06E); EUR 22M dividend payment (30% dividend payout); EUR 24M tax payment. Italy - Footwear Corporate Broking Research Team Marta Caprini marta.caprini@bancaimi.it Price performance, -1Y S O N D J F M A M J J A S PRICE PRICE REL. TO MILAN MIBTEL - PRICE INDEX Source: Datastream. Shareholder structure. Market 49% Source: Consob. Polegato 51% Catalysts. Geox has confirmed its FY06 Autumn-Winter pre-orders expected to impact 2H06E, up by 33%, with footwear up by 31%, and apparel up by 56%, which confirm our FY06E. Focus is now on: 1) FY07E Spring-Summer pre-order collections, just started, which should give visibility on our current +18% FY07E sales growth; 2) continuing efficiencies in overheads and distribution costs, to offset the gross margin pressure in FY06E which however we expect to stabilise in FY07E. Valuation. We have confirmed our DCF based valuation of EUR 9.7/share fair value and we wait for the S/S07 pre-orders disclosure for a potential estimates revision. In our multiples comparison, at the current price, Geox s discount to peers only shows in the E PEG and EV/EBITDA growth ratios. In our IMTG model, the current share price already incorporates a 21% medium term EPS growth rate. Basic figures. Current price (EUR) 9.9 Market cap. (EUR M) 2551 No. of shares (M) week range (EUR) Major shareholder (%) Polegato Fam. 51 Free float (%) 49 Reuters GEO.MI Bloomberg GEO IM Mibtel Performance % Absolute Rel. to Mibtel -1M 0.8-1M M M M M 8.3 Source: Company data, Datastream. 67

2 Geox: At a Glance. Company description. Geox is a producer and distributor of Italian footwear (95% of total sales) and apparel (4%) under the Geox brand. The group s competitive advantage in footwear lies in the comfort and technology content, protected by 30 patents. Geox is the leader in Italy in the footwear segment, mid-priced casual and sport footwear for adults and children (source: AC Nielsen SITA 2003). Revenue by division (1H06). Revenue by region (1H06). Clothing, 4% Other, 1% Other, 15% US, 3% Spain, 11% Italy, 41% Shoes, 95% Benelux, 6% France, 8% Germany, 16% Source: Company data. Source: Company data. Sales and EBIT margin. Net financial position and gearing % % 23% % 25% E 2007E 2008E 26% 24% 22% 20% 18% % % -24% -29% -37% E 2007E 2008E 0% -10% -20% -30% -40% Total sales (EUR M) EBIT margin Net debt/-cash (EUR M) Debt to equity Company data and Banca IMI estimates. Source: Company data and Banca IMI estimates. Value creation. Return on capital employed % 62 42% % 39% 44% % 39% 40% 38% % % % % % 50% 47% % 46% 0 36% 0 44% E 2007E 2008E E 2007E 2008E EVA (EUR M) EVA spread Avg capital employed (EUR M) ROCEt Source: Company data and Banca IMI estimates. Source: Company data and Banca IMI estimates. 68

3 Geox: Valuation. DCF model. Key assumptions (%). 2006E-16E CAGR of revenue E-16E CAGR of EBIT E-16E EBIT margin E-16E CAGR of OpFCF 15.1 WACC calculation % Risk-free rate 4.4 Equity risk premium 4.0 Beta (x) 0.8 Cost of equity 7.6 Tax shielded cost of debt 3.6 Financial structure (D/E+D) 2.0 WACC 7.8 Source: Banca IMI estimates. DCF valuation (EUR M). Present value of OpFCF 858 Perpetual growth rate of OpFCF (%) 2.5 Terminal value 3381 Present value of terminal value 1589 Enterprise value 2448 Financial assets - Net cash 48 Minorities - Equity value 2496 No. of shares (M) Fair value (EUR/share) 9.7 Vs. market price (%) -2 Source: Banca IMI estimates. IMTG model. EPS IMTG calculation (%). First stage (2006E-08E) CAGR of EPS 22.8 Steady state (2015E onwards) EPS growth 2.5 First stage (2006E-08E) pay-out ratio 30 Discount rate (cost of equity) 7.6 Current P/E (x) 29.3 EPS IMTG (2009E-14E) 21.2 EPS IMTG at fair value 20.8 Source: Banca IMI estimates. IMTG sensitivity. % Cost of equity P/E (x) Source: Banca IMI estimates. Peer comparison. Peer comparison (2006E-08E). EV/sales EV/EBITDA EV/EBITDA G P/E PEG Cu. Price EV 2006E 2007E 2008E 2006E 2007E 2008E 2006E-08E 2006E 2007E 2008E 2006E-08E Bvlgari EUR Tod's EUR Hugo Boss EUR MBFG * EUR Escada EUR P.Ralph Lauren USD Burberry GBP Valentino FG * EUR Average Geox* EUR Premium/-discount 107% 96% 86% 41% 32% 23% -22% 33% 24% 23% -12% Source: *Banca IMI estimates and JCF Consensus. 69

4 Geox: Financials. Geox Key figures ( E). Current price (EUR) 9.9 No. of shares (M) 259 Market capitalisation (EUR M) 2,551 Enterprise value (EUR M) 2,527 Values per share (EUR) E 2007E 2008E EPS Adj. EPS CEPS BVPS DPS Payout (%) Stock market ratios (x) E 2007E 2008E EV/sales EV/EBITDA EV/EBIT EV/CE EV/FCF P/E P/CE P/BV Yield (%) Income statement (EUR M) E 2007E 2008E Sales EBITDA EBIT Pre-tax profit Net profit Balance sheet (EUR M) E 2007E 2008E Net fixed assets Net working capital Other liabilities Net invested capital Shareholders funds Minorities Long term liabilities Net debt/-cash Cash flow (EUR M) E 2007E 2008E Gross cash flow Change in NWC Capex Cash from operations Investments, net Dividend payment Other Free cash flow Profitability and financial ratios (%) E 2007E 2008E EBITDA margin EBIT margin Net margin ROI ROE D/E Growth (%) E 2007E 2008E Sales EBIT Adj. net income Source: Company data and Banca IMI estimates. 70

5 General warning. This document has been prepared by Banca IMI Spa s. Research department (Banca IMI is a member of the Sanpaolo IMI Group), an authorised bank regulated by the Bank of Italy for the conduct of designated investment business. The information provided and the opinions expressed in this document are based upon information and data from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made Banca IMI as to their accuracy, completeness or correctness. Any opinions, forecasts or estimates contained herein constitute a judgement as at the date of this document, and there can be no assurance that the future results of the Companies and/or any future events will be consistent with any such opinions, forecasts or estimates. Any information herein is subject to change, update or amendment without notice by Banca IMI subsequent to the date of this document, with no undertaking by Banca IMI to notify any recipient of this document of such change, update or amendment. This document is for information purposes only. This document is not, nor may it be construed, to constitute, an offer for sale or subscription of or a solicitation of any offer to buy or subscribe for any securities issued or to be issued by the Companies. Neither Banca IMI, nor any other company of the Sanpaolo IMI Group, nor any of its directors, managers, officers or employees, accepts any liability whatsoever (in negligence or otherwise), and accordingly no liability whatsoever shall be assumed by, or shall be placed on, Banca IMI, or any other company of the Sanpaolo IMI Group, or any of its directors, managers, officers or employees, for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. To the extent permitted by relevant law, Banca IMI allows its directors, managers, officers, employees and/or respective family members to have long or short positions or effect transactions in the securities (or options, warrants or rights with respect to, or interest in, the shares or other securities) of the Companies. The aforementioned persons may also carry out, have carried out or be about to make purchases or sales of any financial instruments on the market. Banca IMI publishes research on the Companies on a regular basis. The previous Corporate Broking Review was published on Residents in Italy: This document is intended for distribution only to institutional investors as defined in art. 31, Consob Regulation no of either as a printed document and/or in electronic form, and will be distributed with deposit at Consob on the same day in electronic form. and disseminated to the general public not later than 60 days after the start of its distribution, by being posted on Banca IMI s website. Persons and residents in the UK: This document is not for distribution in the United Kingdom to persons who would be defined as private customers under the rules of the FSA. US persons: This document is intended for distribution in the United States only to Qualified Institutional Investors as defined in the US Securities Act of US Customers wishing to effect a transaction should do so only by contacting a representative at Banca IMI Securities Corp. in the US. Disclosure of potential conflicts of interest. Banca IMI discloses potential conflicts of interest, as defined by: Article 69, paragraph 4 and 5, of Consob Resolution No of , as subsequently amended and supplemented, and Consob s Notice No. DME/ of ; the New York Stock Exchange Inc. s Rule 472; the FSA Policy Statement 04/06 Conflicts of Interest in Investment Research March The Bank maintains procedures and organisational mechanisms (Chinese walls) to professionally manage conflicts of interest in relation to investment research; for further information please see Banca IMI s website for Banca IMI s Policy for Managing Conflicts of Interest in Relation to Investment Research. Analyst certification. The analysts named on the front page of this report certify that: (a) The views expressed on companies mentioned herein accurately reflect their personal views; (b) No direct or indirect compensation has been or will be received in exchange for any views expressed. Specific disclosures. 1. One of the analysts has financial interest in Panaria. 2. None of the analysts nor any members of the analysts households serve as officers, directors or advisory board members of the Companies. 3. Two of the analysts named in the document are members of AIAF. 4. The analysts of this report do not receive bonuses, salaries, or any other form of compensation that is based upon specific investment banking transactions. Disclosures. 153

6 5. Banca IMI plans to solicit investment banking business (as defined above) or intends to seek compensation from the Companies in the next three months. 6. Banca IMI signed a Corporate Broking agreement with Astaldi to publish research on the company (August 2004). 7. The Sanpaolo IMI Group has direct financing and/or banking relations with Bolzoni. 8. Banca IMI acted as Global Co-ordinator and Joint Bookrunner in the institutional offering and Global Co-ordinator in the public offering of Bolzoni (May 2006). 9. Banca IMI acted as Sponsor in the IPO of Bolzoni and Lead Manager in the public offering of Bolzoni (May 2006). 10. Banca IMI has publishing duties as Sponsor for Bolzoni, for at least two financial research reports according to Article of the stock exchange regulations Rules of the Markets Organised and Managed by Borsa Italiana Spa (May 2006). 11. Banca IMI acted as Financial Advisor to Buongiorno Vitaminic in relation to the acquisition of Freever (September 2005). 12. Banca IMI subscribed to EUR 1M of the first tranche of Buongiorno Vitaminic s convertible bond (September 2005). 13. Banca IMI had signed a Corporate Broking agreement with Buzzi Unicem (expired on ). 14. Banca IMI has signed a Corporate Broking agreement with Caleffi to publish research on the Company (May 2006). 15. Banca IMI signed a Corporate Broking agreement with Centrale del Latte di Torino to maintain liquidity in its shares and to publish research on the company (May 2006). 16. Banca IMI signed a Corporate Broking agreement with CDC Point to maintain liquidity in its shares and to publish research on the company (April 2006). 17. The Sanpaolo IMI Group has direct financing and/or banking relations with Cremonini. 18. A member of the Sanpaolo IMI Group is present on Esprinet s Group of Auditors. 19. Banca IMI signed a corporate broking agreement with Exprivia (previously Aisoftware) to maintain liquidity in its shares and to publish research on the company (January 2006). 20. Banca IMI signed a Corporate Broking agreement with FullSix (previously Inferentia) to maintain liquidity in its shares and to publish research on the company. 21. Banca IMI signed a Corporate Broking agreement with Gabetti to maintain liquidity in its shares and to publish research on the company. 22. The Sanpaolo IMI Group has direct financing and/or banking relations with HERA. 23. The Sanpaolo IMI Group beneficially owns in excess of 1% of the common equity securities of HERA at the current date. 24. Banca IMI acted as Joint Lead Manager and Joint Bookrunner in the issue of bonds by HERA (February 2006). 25. Banca IMI offered financial advice to HERA regarding an aggregation with META (May - November 2005). 26. Banca IMI signed a Corporate Broking agreement with HERA to maintain liquidity in its shares and to publish research on the company. 27. Banca IMI has quoting obligations as Specialist for I.NET, according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana Spa. 28. Banca IMI has publishing duties as Specialist for I.NET, for at least two financial research reports according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana Spa 29. The Sanpaolo IMI Group has direct financing and/or banking relations with Isagro. 30. Banca IMI has quoting obligations as Specialist for Isagro, according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana S.p.A Banca IMI has publishing duties as Specialist for Isagro, for at least two financial research reports according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana S.p.A. 32. The Sanpaolo IMI Group has direct financing and/or banking relations with IT Holding. 33. The Sanpaolo IMI Group has a direct financing and/or banking relations with Jolly Hotels. 34. Banca IMI has quoting obligations as Specialist for Jolly Hotels, according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana S.p.A Banca IMI has publishing duties as Specialist for Jolly Hotels, for two financial research reports according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana S.p.A. 36. Banca IMI has quoting obligations as Specialist for Juventus, according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana S.p.A Banca IMI has publishing duties as Specialist for Juventus, for two financial research reports according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana S.p.A. 38. Banca IMI has issued covered a warrant related to the securities of Luxottica on Banca IMI has quoting obligations for Mariella Burani, according to Article of the stock exchange regulations Rules of the Market Organised and Managed by Borsa Italiana S.p.A. (March 2006). 154

7 40. Banca IMI has publishing duties as Specialist for Mariella Burani, for at least two financial research reports, according to Article of the stock exchange regulations Rules of the Nuovo Mercato, Organised and Managed by Borsa Italiana S.p.A. (March 2006). 41. Banca IMI has quoting obligations as Specialist for MARR, according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana S.p.A Banca IMI has publishing duties as Specialist for MARR for at least two financial research reports according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana S.p.A. 43. Banca IMI offered financial advice to Mondo HE for its capital increase (September - December 2005). 44. Banca IMI acted as Co-Lead Manager in the syndicate for the private placement of shares by Mondo HE (October 2005). 45. Banca IMI has quoting obligations as Specialist for Mondo HE, according to Article 2A.3.4 of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana Spa. 46. The Sanpaolo IMI Group has direct financing and/or banking relations with Mondo TV. 47. Banca IMI has quoting obligations as Specialist for Mondo TV, according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana S.p.A Banca IMI has publishing duties as Specialist for Mondo TV for at least two financial research reports according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana S.p.A. 49. Banca IMI has quoting obligations as Specialist for Navigazione Montanari, according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana S.p.A Banca IMI has publishing duties as Specialist for Navigazione Montanari for at least two financial research reports according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana S.p.A. 51. Banca IMI has quoting obligations as Specialist for Panaria Group, according to Article of the stock exchange regulations ( Rules of the markets, organised and managed by Borsa Italiana Spa"). 52. Banca IMI has publishing duties as Specialist for Panaria Group for at least two financial research reports according to Article of the stock exchange regulations Rules of the markets, organised and managed by Borsa Italiana Spa. 53. The Sanpaolo IMI Group has direct financing and/or banking relations with Safilo group. 54. Banca IMI acted as Joint Lead Manager in the retail offerring and Joint Bookrunner in the institutional offering of Safilo Group's ordinary shares (November 2005). 55. Banca IMI acted as Joint Global Co-ordinator in Safilo s offer of ordinary shares (November 2005) and will act as Sponsor for the Safilo Group. 56. Banca IMI acted as Mandated Lead Arranger in the arrangement of financing for the Safilo Group (June 2006). 57. The Sanpaolo IMI Group beneficially owns in excess of 2% in the common equity securities of Safilo at the current date. 58. Banca IMI signed a Corporate Broking agreement with Trevi to maintain liquidity in its shares and to publish research on the company (August 2004). Banca IMI offered financial consultancy to Uni Land within its secondary offering for the rebuilding of its free float. With regards to the latter, Banca IMI has acquired blocks of Uni Land's ordinary shares (May 2006) and has signed two equity swap agreements with Cemlux expiring in six months, with the ability, for hedging purposes, to sell on the market the acquired shares of Uni Land within the expiry date of the swap agreement (May-July 2006). 59. Banca IMI offered financial advice to Cemlux in the takeover bid for Perlier (now called Uni Land) (May-December 2005). 60. Banca IMI acted as Intermediary in the takeover bid for Perlier (now called Uni Land) (July 2005). 61. Banca IMI has signed a Corporate Broking agreement with Uni Land to publish research on the Company (March 2006). 62. The Sanpaolo IMI Group has direct financing and/or banking relations with Valentino Fashion Group (previously Marzotto). Recommendation definition and history. As at , research produced by Banca IMI did not include specific stock ratings or target prices. Therefore, we do not show target price and rating histories, nor a stock rating system and distribution of ratings (in aggregate or for companies for which Banca IMI has provided investment banking services in the last 12 months). 155

8 This document is prepared, approved and distributed by Banca d Intermediazione Mobiliare IMI Spa ( Banca IMI, a member of the Sanpaolo IMI Group), Milan, an authorised bank regulated by Bank of Italy and Consob for the conduct of designated investment business; this document is also distributed by Banca IMI London Branch (a member of the London Stock Exchange) regulated by the FSA for the conduct of designated investment business in the UK, and by Banca IMI Securities Corp. (a member of the NYSE and NASD) regulated by the SEC for the conduct of designated investment business in the US. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly to any other person or published, in whole or in part, for any purpose without prior written consent by Banca IMI. The copyright and intellectual property rights on the data, information, opinions and valuations contained in this document are the exclusive property of the Sanpaolo IMI Group, unless otherwise indicated. The data, information, opinions and valuations contained in this document may not be subject to further distribution or reproduction, in any form or via any means, even in part, unless expressly consented by Banca IMI. By accepting this document you agree to be bound by all of the forgoing provisions. Banca d Intermediazione Mobiliare IMI Spa co-ordinates the investment banking activities of the Sanpaolo IMI Group. Worldwide, these activities are conducted through the companies listed on this page. Banca d Intermediazione Mobiliare IMI Spa Corso Matteotti 6, Milan, Italy. Tel: (39) Banca IMI Securities Corp. 245 Park Avenue, 35th Floor New York, NY, USA Tel: (1) Banca d Intermediazione Mobiliare IMI Spa London Branch Warwick Court, Warwick Lane, Paternoster Square London EC4M 7LZ, UK. Tel: (44)