IMA S.p.A. : relative valuation (historical market multiples).

With regard to the valuation, it is interesting to consider also its historical market multiples.

However, it needs to mark the following considerations :

• Every time period has its own market multiples, due to the macroeconomics factors and to the economic cycle ; in this way, the comparison term loses its value ; 

• The market anticipates the events and prices the expectations ; for this reason, the past valuations had always incorporated the whole scenarios ; the valuations and future market multiples are more important ; 

• Thirdly, with regard to the litterature, the relative valuation is composed always with a peer analysis, with a focus on the expectations of the sector (see the link, https://michelecarollo.blogspot.com/2018/11/ima-spa-relative-valuation.html). 

Here, we have the historical market multiple P/S. I used this market multiple with the aim to reduce the bias : the results at the top of the income statement are less influenced by several factors. 

We can notice that the last multiples are higher than the past multiples but we must consider the previous paragraphs, of course.

Then, the market valuation tends to assign higher multiples to a growing company, over time, like IMA S.p.A.

In this way, it is advisable to consider also a median of the multiple or a weighted average (the past prices are less important than the current prices). 

The expected market multiples (the yellow columnes) are substancially lower than the mean, median and weighted average (black and dashed lines in the chart). The gap is not so wide (that confirms the previous valuation). 

IMA S.p.A. : relative valuation.

Here we have a relative valuation of IMA S.p.A. It operates in the industrial machinery and equipment, like the peers of the sample. In particular, its business is focused on the packaging industry, through the segment lines : tea, food and other ; pharmaceutical sector. 

In order to select the peers, I considered the following requirements : similar business and geographical area and similar size (revenues or market cap as the proxy of the size), having regard to the differences, like the profitability, the growth, the risk and the financial structure (in this way, I adjusted the market multiples, appropriately or I considered the difference as a discount or as a premium in the valuation ; about the financial position, the differences are very small).

I used a leading market multiple (expected results in the year 2018, 2019, 2020, data source : www.marketscreener.com). I also considered the management assumptions, expectations and business plans.

Let's look at the market multiples, in the following table.

It needs to consider that about the equity story and size GIMA TT ("recent history") seems to be a a distortion compared to the other firms. It can be interesting, regarding its similarity to IMA, however, it is more advisable to exclude it from the peers group.
Then, we can calculate the mean and the median, respectively :

EV/EBITDA (10.08 | 9.44) ; P/S (1.60 | 1,70) ; P/E (18,45 | 17)

At a glance, we can notice the discount of IMA S.p.A, apart price to earnings.

Secondly, it is more useful to link the market multiples to the fundamental variables (profitability and growth, above all). In this way, see the next table.

We can calulate the mean and median, excluding GIMA TT again and IMA, for obvious reasons.

EBITDA margin (15.72% | 18.12%) ; EBIT margin (12.55% | 15.03%) ; NI margin (8.71% | 10.40%)

CAGR EBITDA (8.94% | 7.58%) ; CAGR revenues (6.66% | 5.94%) ; CAGR NI (12,85% | 12.74%)

Substantially, IMA marginality is slighy lower compared to the sector profitability ; however, the growth is rather higher.

Finally, let's put the variables together, thanks to a regression line.

Market Multiples (Y) vs Profitability (X)

Market Multiples (Y) vs Growth (X)

In the two charts, the intercept is not considered because it is not important, in a statistical point of view (statistical significance). However, the angular coefficient is good. The R-squared is excellent, in the following order (from the lowest to the highest) : P/E regression, EV/EBITDA regression and P/S regression.

So, we can determine the fair value of IMA and its premium or discount. In other words, its intrinsic market multiple.

margins
FV (I) = P/E = 181,61*7,30% = 13,25                       
premium : +36,7%

FV (II) = EV/EBITDA = 60,513*15,65% = 9,47     
discount : -7,82%

FV (III) = P/S = 12,88*12,85% = 1,65
discount : -20,24%

growth
FV (IV) = P/E = 120,66*17,54% = 21,16                 
discount : -14,4%

FV (V) = EV/EBITDA = 100,75*12,15% = 12,24   
discount : -28,7%

FV (VI) = P/S = 23,794*7,14% = 1,7                       
discount : -22,3%

Finally, we can conclude than the discount is higher (as I said) with the growth. With the margins, the discount is smaller and we have a premium with the P/E regression. At a glance, IMA is traded at a slighty lower market price compared to its hypothetical fair value. Of course, it does not represent a safety margin, at the moment. The price still could go down for the reason that the trend is clearly bearish. However, the current market price is beginning to be interesting.

Servizi Italia S.p.A. : plain DCF and target price.

In the following image, we have an example of DCF valuation. 

The firm is Servizi Italia S.p.A. The valuation date was August 18, 2016 and the target was 6.06 EURO (plus a range with regard to the fair value, +/-5%). The target was achieved on November 23, 2017 (in this way, the holding period was about one year and 3 months or 462 days, exactly). For this purpose, consult the following link and see the second one image : 

https://twitter.com/search?l=&q=DCF%20from%3Amichele_finance&src=typd&lang=en

The upside was about +73%, with regard to the current market price at the time of the coverage :

[6.06 - 3.50] / 3.50 = + 73.14 %

Let's look at the assumptions of the model :

1. The revenues were the proxy of the model : it means that all the variables depended directly on sales as a percentage.
2. For the estimation of the revenues of the next three years (2016-2017-2018), I assumed a CAGR of about 3% (the business of the firm is quite steady) ; I looked also at the trend of the past three years. 
3. For the other items (D&A, NFC, net income, NWC, capex), as I said previously, I assumed a percentage of the revenues : 20%, 1.5%, 5%, 0.5%, 20%. I looked also at the past trend and I considered the evolution of the sector and of the firm, in the next years (for the formula, consult the notes). 
4. For the estimation of the ERP and tax rate, I used the data source of A. Damodaran (ITA).
5. For the risk-free rate, I assumed the weighted average yield of BTP 10 years.
6. For the estimation of the beta, I used the regression between FTSE-mib and Servizi Italia with a time frame of 5 years and with monthly returns (I added a spread of 0.10 to consider the additional risk, due to the reduced liquidity of the stock). 
7. For the cost of debt and for the financial structure, see the notes.
8. For the growth rate (g), I assumed a conservative rate of 1% (see the litterature). 
9. With regard to the calculation of the EV and of the fair value, see the following formula and consult the notes:

EV=[FCF16/(1+wacc)^1]+[FCF17/(1+wacc)^2]+[FCF18/(1+wacc)^3]+[FCF18*(1+g)/(wacc-g)]*[1/(1+wacc)^3]

Estimate of the cost of debt.

The calculation of the firm's cost of debt is an important factor. Then, it has a direct application in various areas ; in particular, it is useful : 

• to build a DCF model, in order to value a company (it is a variable to estimate the WACC) ;
• to adjust the market multiples (higher the cost of debt, lower the market multiple and viceversa) ;
• to understand the risk of a business and the debt sustenaibility (in other words, the cost of debt is the proxy of the financial structure) ; 
• to value the risk of a stock, indirectly.

And on that note, we can analyze the main calculation methods. 

I. The cost of debt : the accounting method.

The accounting method is based on balance sheet data. It is easy to estimate but it is also quite prone to errors. It means that if on one hand, the data are readly available, on the other the result is purely static because it doens't consider the perspective scenarios. Indeed, it is advisable to integrate the method with a perspective business plan, focused on the financial structure of the target firm. 

According to this method, the cost of debt is equal to the financial expenses divided by the financial debt. There are two options : the first one considers the gross debt minus the cash and cash equivalents (it means that the debt can be paid by the cash ; this hypothesis is not always true) ; the second one considers the gross debt and the interest expenses (this hypothesis is more prudential). 

Here we have an example ; the company is Amplifon S.p.A. We can notice the two options. The accounting data are the fiscal years 2017 and 2016. 

For further info, please consult the following links : 

http://corporate.amplifon.com/documents/20182/924189/10-annual-report-eng-2017.PDF/bd69823c-0a53-4e0e-b0f5-9d99d6ce87da ; http://corporate.amplifon.com/documents/20182/806218/press-release-fy2017.pdf/aa8c39df-721f-4535-a30d-2adafb1a1344. 

As shown in the table, the cost of debt is equal to 7,41% if we consider the net debt and it is equal to 4,63% if we consider the gross debt. An important note : the interest expenses are divided by the average debt with the aim to make comparable the two quantities, the item of the income statement ("flow quantity") and the item of the balance sheet ("stock quantity"). 

Another option of the accounting method is the following : we can also consider an average figure of the cost of debt on several years (3-5 years). In the same way, we can build a perspective table with the estimated financial debt and interest expenses (the next 3-5 years at the place of the past ones). 

II. The cost of debt : the relation between the interest coverage ratio and ratings (the fundamental analysis drivers).

We can link the interest coverage ratio (= EBIT/net financial expenses) to the ratings of a sample. 

For example, the professor A. Damodaran (see the link,--> Ratings, Spreads and Interest Coverage Ratios, http://pages.stern.nyu.edu/~adamodar/) has built a sample with the rated companies in United States. There are two tables : for large, for smaller and riskier companies (the proxy of the size is the market cap). With the current exchange rate and with the current m. cap, Amplifon belongs to the second group (https://www.investing.com/currencies/eur-usd). 

Data source : Damodaran Online

The cost of debt is equal to :

Risk-free rate (Rf) + Default Spread (DS)

For Amplifon the DS is equal to 0.90% (the EBIT interest coverage ratio is 7.76 and the market cap is about $4 billion). For the Risk-free rate (Rf), we can use the annual return of the 10-year T-bond (see the link http://www.stern.nyu.edu/~adamodar/pc/datasets/histretSP.xls ; data source Damodaran Online). For the year 2017, it is equal to 2.80%. In this way, the cost of debt for Amplifon is :

2.80% + 0.90% = 3.70%

As I said, the sample consists of US companies. For a more appropriate sample, of course, it is advisable to use European companies and rate of returns of government bonds, similarly. 

Finally, we must remember that the spread that we add to a base rate can be determined by other fundamental ratios (the interest coverage ratio is just one of the drivers). In this way, the discussed methodology is a part of the framework based on the fundamental analysis. 

III. The cost of debt : the listed bonds.

The last method is among the most reliable and the easiest to apply methods. If we have a firm with listed bonds, the cost of debt is equal to the rate of return of the mentioned bonds (-->yield to maturity, YTM). Alternatively, we can take as a benchmark a panel of similar listed bonds.

For Amplifon, we can consider the bond listed on the Luxembourg Stock Exchange (LuxSE).
See the following link : https://www.bourse.lu/security/XS0953207759/200201. 

The management efficiency : cost-to-income of the italian banks.

The cost to income ratio is equal to the operating costs divided by the intermediation margin. 

In other words, using the bank balance sheets items, it is equal to the following expression :

COST/INCOME RATIO : operating costs ("item 230") / total banking income ("item 120")

The meaning is : the lower the value expressed by the indicator, the greater the efficiency of the bank. Usually, the index is expressed as a percentage. Otherwise, the operating expenses are a percentage of the operating income. The ratio is also useful to value the productivity and the profitability for the banks. 

Here we have a sample : it is the peer group of the main banks, in Italy. In order to have a fair comparison, I used the adjusted results and I used the same criteria with regard to the same period, last year (we speak about the nine months ended on 30th September 2017 and about the nine months ended on 30th September 2016). For further info, please consult the notes below the table (1-7) and visit the section investor relations. 

At a glance, we can notice that : 

• The efficiency is substantially the same compared to last year ; indeed, we can see a slight improvement, in general.
• We have two banks that represent the outliers of the peer group : CVAL and CRG ; the ratios had a strong worsening, compared to the nine months of the year 2016. 
• In the same way, we have other outliers (by the positive side), FBK and BGN. However, the two banks have a similar cost/income ratio, substantially, compared to last year. Reasoning by p.p. : by the negative side, about + 60 p.p. ; by the positive side, about from -2 to -7 p.p. (2017 vs 2016). 
• Following the considerations of the previous points, it is more useful to focus on the median than on the mean. See the following table. 

Finally, the bar chart is much more explanatory. The two period have two colors, respectively, the light blue for the year 2017 and the red for the year 2016. The median is highlighted by a horizontal line.

With the aim of ranking the abovementioned banks, we have :

1) BGN ; 2) FBK ; 3) ISP ; 4) IFIS; 5) BPSO ; 6) MED ; 7) UCG ; 8) BMPS ; 9) BPER ; 10) UBI ; 11) CREDEM ; 12) BANCO BPM ; 13) CVAL ; 14) CRG.

The Patent-Box.

The Patent-Box is a facilitated taxation of income arising from a certain types of intangibles assets like know-how, trademarks and patents. It is a way to encourage the investment of the firms in research and development. The beneficiaries are all eligible corporate income taxpayers, regardless of their legal form (corporate enterprises, partnerships, cooperatives, mutual companies, public and private), of their size and accounting regime adopted.

The main requirement is the following : the abovementioned firms need to carry out research and development activities with the aim to product certain intangibles assets (internally or not). The excluded companies are those in liquidation and/or with extraordinary administration, as well as the firms that determine the income with fixed criteria and self-employed people. 

The facilitated taxation regards the use (direct or indirect) of :

• copyright-protected software ;
• trademarks (registered or under registration) ;
• designs and models (legally protected) ;
• processes, formulas and information (industrial, commercial and scientific field, legally protected).

The facilitation consists in deduction of income related to previous use which does not contribute to the generation of total income by 50% of the relevant ammount (30% for the fiscal year 2015, 40% for the fiscal year 2016 and 50% for the fiscal year 2017). In order to quantify the benefit, it needs to calculate the amount of income arising from the use of intangibles assets. 

1. With indirect use, the income is equal to the fees resulting from the use of the asset, net of tax-related costs.
2. With direct use, it is equal to the economic contribution of the asset vs the total income of the company ("Ruling Procedure").

Then, we must also consider the allowable income share, on the basis of the ratio between the cost of reasearch and development activities, relevant of tax purposes (including the maintenance, growth and development of the intangibles assets) and the total costs, relvant of tax purposes, incurred to product such goods. Finally, we can apply the deduction percentages (30%, 40% and 50%). 

The facilitated tax option has a duration of five tax periods. It is irrevocable and renewable.

The option must be transmitted telematicly. The option covers the tax period during which is communicated and the next four. The option is significant in addition for the IRES and IRPEF income and also for the value of IRAP production. 

Lately, in the luxury sector we have had two examples : Tod's and Brunello Cucinelli. 

The benefit is estimated at the time of the earnings release. The regime covers five years (2015-2019).

Patent-Box : Tod's S.p.A.

The same for Brunello Cucinelli : see the following image. 

Patent-Box : Brunello Cucinelli S.p.A.

To read the full press-releases, please consult the following links : 

https://www.todsgroup.com/system/document_ens/560/original/press_release_2017_01_25.pdf ; http://investor.brunellocucinelli.com/yep-content/media/BC_CS_Patent_Box_-_ENG.pdf. 

As we read in the previous documents, we can notice that the impact of the benefit is small. 

Simply, it is a surplus-value linked to fiscal and legal matters. Clearly and primarily, the intention of the legislator is to promote the use of the intangibles assets, without paying much attention to the effective higher income (generable). 

Brunello Cucinelli S.p.A. : comments with regard to the 1rst half 2017 results.

We have a double-digit growth in both revenues and in profit. The perfomance is better in the international markets than in domestic market. However, overall, the results are good. 

Net sales benefit from the forex : at current exchange rates, net sales rose by 10.7% ; at costant exchange rates, net sales rose by 9.7%. 

The brand has a great perception among the customers and among the different distribution channels ("digital" and "physical"; retail, wholesale multibrand and wholesale monobrand).

About the net financial position, we have a decrease due to the good cash generation from operating activities (+26,519 vs +4,339) and due to the positive changes of the net working capital (for further info consult the consolidated statements of cash flows).

It was used cash flow in investing activities (-22,749 vs -16,849) to support the brand, to safeguard its prestige and its exclusivity.

The following table shows the income statement data : there is an improvement of the items (double-digit growth, like I said previously) and, at the same time, an amelioration in the margins. 

The management explains that this good policy will be proposed also in the future, thanks to the investment plan 2017-2019. To read the full press release, please see the link (Brunello Cucinelli investor relations) :

http://investor.brunellocucinelli.com/yep-content/media/BC_1H_17_Consuntivo_ENG.pdf

At the release of the data, the market reaction was good : the volumes increased and there was a white candle. However, just after, the candles presented some shadows (Doji Star Bearish pattern). 

It means a weakness in the bullish wave, a resistance in the maximums and a pressure from the sellers. The BB shows an high volatility that may be absorbed, subsequently. See the chart.

Chart from Investing.com

The stock is not at all cheap. 

If we project the growth of the first half of the year, applied to the full year 2016, we get :

Full Year 2017 Revenues  = 457,029 * (1 + 10.97%) = 507,165.1

Full Year 2017 Net Income = 37,119 * (1 + 23.88%) = 45,983.02

If we project the margin of the first half of the year, we get :

Full Year 2017 Net Income = 507,165.1 * 8.12% = 41,181.8

At the current prices, we have a market cap of  1,731 EUR M. It means about 40X the expected earnings and about 3.40X the expected revenues.

There is a premium compared to the peers (considered also the smaller size of the firm). 

This premium can be explained by : 

• The high brand perception ;
• The rarity and the craftsmanship of the product ;
• The quality of the management and of the business ;
• M&A opportunity, having regard to the small size ;
• The higher defensiveness of the stock (low beta 0.29, Brunello Cucinelli overview from Investing.com, vs the industry average). On the long run, it is a safety for the price stability. 

Moncler S.p.A. : cash flow statement analysis.

Here we have the consolidated cash flow statement of Moncler (full year 2016 results). 

For further info, we can consult the following link (investor relations) :

https://monclergroup-dunebuggysrl.netdna-ssl.com/wp content/uploads/2016/07/Moncler_Annual_Report_2016.pdf

Consolidated cash flow statement

I will produce a detailed analysis of the cash flow statement with the aim of understanding if : 

1. The firm has a great financial balance ;
2. The core business is able to support the other areas (as it should normally be), investing and financing activities. 

At a glance, we can notice that the core business (operating activities) generates cash flow (+383,664). It is very important for a functioning business. If a firm absorbes cash flow from operating activities, it is not vey good. Substantially, it is a poor business. 

However, the investing activities and financial activities absorbe cash flow. A functioning firm should invest to grow (like Moncler with a negative cash flow from investing area > purchase of tangibles and intangibles fixed assets > -63,301). The financing area should generate cash flow (positive cash flow), to support the business and to grow, following the foregoing reasoning. Instead, the firm prefers repaying the debts (repayment of borrowings, -68,592). 

To summarise, the cash flow from operating activities should be positive and able to cover the financial needs from the other business areas. We are in a great situation with a positive cash flow from the core business and big enough to offset the cash outflows from the other activities. 

We are in a bad situation with negative cash flow from the operating activities and the other areas are not able to generate adequate cash flow to cover the cash outflows from the other business areas. 

The following table and the following  pie chart is very exhaustive. At the same time, Moncler presents a great financial balance and a core business capable to support the areas that absorb cash flow. Indeed, the total net cash flow is positive (a+b+c) and the percentage of the cash flow from operating activities compared to the percentages of the other areas is greater than 50%. There is also an improvement if we look at the fiscal year 2015 and at the fiscal year 2016 : from 54% to 61%.

Table of the cash flows and compared pie charts

To conclude, it is useful to calculate two ratios : revenues monetization index (also known as monetary ROS) ; EBIT liquidity index. The formulas are the following. 

Monetary ROS : Cash flow from operating activities / Revenues.

EBIT liquidity index : Cash flow from operating activities / EBIT.

The following chart shows the compared analysis. For the EBIT, I used the EBIT adjusted, due to the non-recurring items. 

Cash flow statement ratios

The two ratios are very good, as a percentage. The cash flow from operating activities represents the 27% of the revenues and the 88% of the EBIT. There is also an improvement from the full year 2015 to the full year 2016.

COVER 50 S.p.A. : a good firm with low visibility.

With regard to the FY 2016 results (consult the link http://www.cover50.it/wp-content/uploads/2017/04/cover-50-comunicato-stampa-130417.pdf), the business increases.

The profitability is strong (from 12% to 48%, from the net income to the contribution margin). 

The cash is high and the cash generation, too (see the cash flow statement) : we speak about a net financial position of about 11.9 EUR millions. The financial structure is excellent with low dependence on debt ("the company mostly finances itself with equity") and the EBIT interest coverage is very good (aka EBIT/net financial charges). 

However, the growth rates are really tight. The business increases at a rate of  2% / 3%. 

The main weakness is the low visibility explained by :

1. Low growth rates ;
2. Low volumes of the stock (COVER 50 is listed on AIM that is notoriously known for those features) ;
3. Free float 25.77% (http://www.cover50.it/azionisti/) with the significant shareholder Fhold S.p.A. with a share of 74.23% (this factor with the previous point could really represent an obstacle for the market liquidity) ; 
4. The mono-product (the company specializes in the designing, manufacturing and selling men's as well as women's trousers, under the PT Pantaloni Torino brand name) and  the high dependance on the domestic market (the revenues in italian market are still about 43% of the total revenues). 

To improve the business and the visibility (with positive effect on market prices), they should invest more (with a cash of 12 EUR millions, the growth throught M&A could be an opportunity).  At the same time, the development to the high-potential markets should be greater (in particular, with a product differentiation). The subsidiary PT Corp in USA is an example (http://www.cover50.it/wp-content/uploads/2015/04/COMUNICATO-STAMPA-23-SETTEMBRE-2015-rev-BIM.pdf).

As announced in the last press release, the yield is about 4.4% and the payout is about 71%. I would have preferred a reinvestment of the profits rather than a (good) shareholders remuneration, to finance the growth. In this sense, the higher growth attracts the visibility. 

Indeed, the market multiples could be cheaper compared to the peers (on average, fashion and luxury stocks have excessive valuations, due to the brand perception/visibility and due to the high profitability). 

At the current prices, the multiples of COVER 50 (FY 2016 results) are the following : 

• P/S = 2.28 
• EV/EBITDA = 8.12
• P/E = 18.52

The market probably discounts the lack of the visibility and of the liquidity, the lower size and the lower growth expectations (adjusted market multiples). 

About the chart and with regard to the last performance, we have a renewed interest of the investors : the volumes are increasing and the stock is out of the rectangle (accumulation area) with a stop in area 13.7 EUR. 

See the link https://twitter.com/michele_finance/status/773242796425768961/photo/1 and compare it with the current situation (the updated chart is below). 

Chart from Investing.com

Cement industry : Cementir Holding S.p.A. and the value map.

Here we have a classic value map that relates the market multiple P/S (price to sales) to its intrinsic profitability (EBIT/sales or EBIT margin or ROS) and then the mentioned multiple to the expected growth, from the year 2017 to the year 2019 (data source estimates : www.4-traders.com). 

The expected growth is the CAGR, aka cumulative average growth rate. 

The formula is the following : 

[(expected revenues fiscal year 2019/revenues fiscal year 2016)]^(1/3)-1

It is expressed as a percentage. 

The meaning of the relationships (P/S-ROS and P/S-CAGR) is that higher the multiple (P/S), higher the margin (ROS) and higher the multiple (P/S), higher the expected growth (CAGR) and viceversa. 

Obviously, the market generally rewards the firms with higher profitability and with higher growth, with a major market price. 

The relationships can be shown as a value map, particularly through a regression line. 

We have two equations : 

1) P/S = a + b*ROS

P/S = y ; ROS = x

2) P/S = a + b*CAGR

P/S = y ; CAGR = x

In both cases, the intercept (a) was removed for the reason of the low statistical relevance. 

The RSQ is high (0.9070 and 0.8488), which means the strenght of the model.

Graphically, we can note that the relations are clear, substantially : higher the market multiple, higher the profitability and the expected growth.

The stocks above the regression line (dashed line) are overvalued, the stocks below the regression line are undervalued. In this way, for Cementir Holding, we get a "value gap" that is equal to :

[P/S (effective)-P/S(calculated from the market model)] : [P/S(calculated from
the market model)]

The P/S (effective) is 0.72.
The P/S (calculated from the market model) is equal to (9.10%*12.54).

There are also some "outsiders" (Vulcan Materials, Eagle Materials). The profitability is very high compared to the peers. Indeed, we have a multiple P/S of about 4X.

Likewise, for the relationship P/S-CAGR : see the following chart.

The discount ("value gap") is much greater, 71.94% vs 36.91%. The "growth adjusted market multiple" is preferable to the "multiple adjusted for the profitability".

If we remove the two outsiders from the sample, the statistical models are stronger : RSQ is higher, the relations are more even significative. However, the discounts are lower : 10.36% vs 36.91% and 57.16% vs 71.94%.

Finally, Cementir Holding is cheaper than the peers. Secondly, in my opinion, the stock is much more attractive in the area 3.80-4.80 : we could benefit more so from the discount prices and from a possible graphic retracement (see the chart), event if the current prices and expectations are interesting.

Chart from Investing.com

For further information, consult the following links:
http://michelecarollo.blogspot.it/search?q=cementir ;
https://stocktwits.com/michele_finance/message/75068152 ;
https://stocktwits.com/michele_finance/message/79046330. 

Geox S.p.A. : the FY 2016 results undermine the ongoing turnaround.

The FY 2016 results are under the expectations of the analysts' estimates and of the targets of the business plan. The revenues grow by 3% (vs the CAGR of the BP, about +6.5% or +5.5% with the lower range of the guidance). Of course, the margins are really under pressure : the gross profit decreases, the same both for the EBIT and for the net income. The results should be considered net of extraordinary items. However, the business is not proceeding well and the cost savings policy is not giving the desired results.

We have an increase of four percentage points, with regard to the cost of sales margin (from 48% to 52%). Overall, there is a great margins erosion. About the expectations, they were estimated stable or slighty higher compared to the FY 2015 results. 

See the link to read about the related press release and compare it with the consensus. 

On many fronts, they are disappointing, more so after the good trend of the 9 months 2016 (appreciated by the market at the time of the release) and a fortiori with the good progress of the triennium 2013-2014-2015 (appreciated by the market with an excellent stock market performance from 2 to 4 eur/share). 

In my opinion, the management's credibility is in doubt for the above reasons. The market is discounting it. Secondly, in particular :

1) They failed the previous business plan ;

2) With insight, the change of the CEO is probably regarded as a rupture ; I would have appreciated more if the management had much clarified about that. Instead, substantially, they only confirmed what it was said before, in the press release ; 

3) The results are now under the targets of the current business plan ; 

4) The 2016 was supposed to be a transitional year but the results marked a strong deterioration ;

5) The loss of the profitability in the first half of the year 2016 had to be compensated along the second half of the year but we have a clear decline of the margins. 

Press release, first half 2016 results

Press release, 9M 2016 sales

They should work well over the next two years of the plan, to regain credibility, also focusing on the new CEO and on the new markets, like China. The small margins are the great problem ; they must work in that direction (improvement of the margins). Otherwise, the market will probably dislike with a bad price performance ; the decrease of the stock is the evidence, after the earnings release  (the negative impact was partially offset by the good performance of the FTSE-mib ; Geox, beta of about 0.80/0.90). 

Chart from Investing.com

The local banks : Banca Popolare di Sondrio and Credito Valtellinese.

Throughout history, CVAL and BPSO have been the subject of more comparisons because of geographical proximity, the similarity of the business and other aspects.

It has spoken repeatedly of a possible marriage between the two banks (http://www.ilgiorno.it/sondrio/cronaca/2012/11/12/800989-Fusione-Credito-Valtellinese-Banca-Popolare.shtml ; https://www.investireoggi.it/finanza-borsa/bper-creval-popolare-sondrio-ipotesi-fusioni-due-scenari-possibili/ ; http://www.milanofinanza.it/news/creval-pop-di-sondrio-mercato-scommette-su-fusione-201406021112394411), due to the strong similarity.

However, in my opinion, in the M&A sector, the most important thing is to create adding value and synergies. If you match together two equal businesses, you don't generate synergies. 

The result of the merger is only the same firm but greater : that is not a complementary business but a substitute. Of course, the common aspects can be used for a major geographical control and for the lower competition, in this way. Nevertheless, in the long-run, you need to grow/to acquire new markets and customer segments, you need to implement new services. By focusing only on geographical matter and/or on the classical commercial bank, you will not reach those goals, most likely. 

Nowadays, the market is changing, costantly. We must be able to meet the challenges and we have to be more flexible : the banking sector (like the past) is dead ; the new banking sector is integrated, inevitably. 

About the latest news, the hypotheses seem to be oriented more to BPER and UNIPOL, after the press relase http://www.gruppocreval.com/media/comunicati_en/CV-CS-Nomina-Advisor-ENG.pdf.

See the link below : http://www.milanofinanza.it/news/equita-in-caso-di-fusione-con-bper-il-premio-va-al-creval-201701231129545256.

Because of the above reasons, I would consider these options more positively. 

M&A apart, it is interesting to compare the numbers (FY 2016). For further info, see the links : 

http://www.gruppocreval.com/media/comunicati_en/2017/CV-CS-Risultati-FY2016-ing.pdf ;

http://www.popso.it/cm/pages/ServeBLOB.php/L/EN/IDPagina/2100.

The direct (+4.76%) and indirect (+0.61%) funding grows where for CVAL, we have a decrease, -2.7% and -4%, compared to the same period. The same, with regard to loans and receivables with customers (-8.5% vs +5.49%).

The capital ratios are equal, substantially : CVAL, CET1 11.8% vs 11.09% (BPSO) and Total Capital Ratio 13% vs 13.58% (BPSO).

About the organisational data, there is an improvement for Banca Popolare di Sondrio : 128 new hires and 5 new branches. Credito Valtellinese got worse : number of employees (-1.65%) and number of branches (-4.37%). 

With regard to the credit risk, the credit quality of BPSO is better, of course. The following table shows the comparison.

BPSO has far fewer NPLs and it has higher coverage. The coverage ratio expresses a prudent policy of the bank and a lower potential risk, the higher the coefficient. The cost of the policy is better than CVAL.

Finally, about other financial information, the cost to income ratio shows the better operating efficiency of BPSO, 55.31% vs 69.7% (CVAL). Speaking about the income margins, for both, there is a drop in margins, thanks also to an unfavorable macroeconomic context. However, for BPSO, the decrease is balanced by a cost savings, like administrative (+2.53%) and personnel expenses (+0.44%) vs CVAL, +4.22% and +17.34%. Secondly, there are minor net adjustments for BPSO.

Overall, clearly, at the end of the comparison, BPSO is the favorite. On the other hand, we should not forget the M&A factor that could change the scenario (market price and business) for CVAL, positively.
In fact, CVAL is well set to grow by external lines (like announced) while BPSO seems to continue through the autonomous growth. 

Cementir Holding S.p.A. : the new acquisitions boost the business.

The last uptrend of the stock is due primarily to the preliminary consolidated results at 31 December 2016 : results over the expectations of the analysts. The good results are related to the new acquisitions of Sacci and Compagnie des Ciments Belges that worsened the net financial debt.

On like-to-like basis, the results would have been stable or decreasing. 

Cementir Holding, Investor Relations, Press Releases

From this point of view, the growth through acquisitions is a focus for the business.
According to me, it will be the likely growth engine for the coming years.
History is there to prove it. The strategy is always the same : organic and external growth thanks to the numerous acquisitions over the years, with a low dependence on the domestic market (about 10% of the revenues). See the image below.

Cementir Holding, Group Profile

The outlook is substantially conservative, EBITDA of around 215 EUR million. The business is still suffering unfavorable FX and geopolitical troubles (Turkey). However, the management is well set to make the difference with a cost saving policy and with the strong implementation of the integration just closed (Sacci and CCB).

Cementir Holding, Investor Relations, Press Releases

About the fundamentals, the price is pretty interesting although the expectations could be flat/conservative (mainly, about the margins). With the 2017 expected results : P/S 0.65 X ; EV/SALES 1.07 X ; EV/EBITDA 6.20 X ; P/E 12 X ; P/B 0.7 X.

Reuters Consensus

About the chart, the downtrend from 7 EUR/share is over. For some time today there is a lateral trend but the last performance with volumes is a good signal that could invalidate the trading range (3.30-5.05). It needs a continuation with the break of area 5/5.30 (FIBO level 38.2%).

Charts from Investing.com

Charts from Investing.com

In the meantime, the uptrend is too strong in a short time : about +30% with five trading sessions. The volatility is high (in the high range of the BB), RSI is overbought, there is a gap down to cover. There will be a physiological price correction, probably.

Charts from Investing.com

Charts from Investing.com

Geox S.p.A. : business turnaround & BP, drivers of the (possible) upside for the next months.

With the presentation of the strategic business plan (2016-2018), at the current prices (about 2 eur/share), the stock seems to be interesting, about the valuation (2018E) : EV/EBITDA 5X, 

EV/SALES 0.5X. The market multiples are more generous in its sector (luxury sector and the like). 

Secondly, the ratios must be adjusted for the high expected growth (see the following image).
Indeed, the expected growth is greater compared to its peers. The handicap is the profitability : the margins are low ; however, with the progress of the business plan, we will see a likely improvement of the EBITDA margin  (from 7% to 10%) and of the NET INCOME margin (from 1% to 4%). 

Then, the margins are supporting the growth and the investments.

Analysis dated December 4, 2016 ;  revised data from www.4-traders.com

The management is implementing a saving costs policy and they are streamlining the stores.
There is a change in the business : investments and advertising & promotions. The product is changing, compared to the past years, the geographical focus, too (sales increasing with a major growth rate in "other countries"). The last agreement with Pou Sheng International  was signed with that purpose (the italian market is stationary or declining). 

The valuation is interesting if we compare it with M&A multiples, too. 

                              

There are some risks, of course. The business plan could be not achieved even if the credibility and communicability of the management are better versus the previous business plan.
The current BP is far less aggressive with lower risk of PWs, the guidance is a range without interim targets, the starting point is the full year 2015 (in fact, radical and positive changes over the years 

2013-2014-2015).

Data source (except the chart, Investing.com ) : Geox S.p.A. Investor Relations

Finally, at the current prices, it could be an opportunity (not free of risks) because there is a potential 

that is not discounted in market prices.
Secondly, the risk is smaller : one consideration is buying at 4 eur/share ("bubble prices") and another is buying at 2 eur/share (more so with the mentioned assumptions).