Category Archives: Piquadro

Piquadro update – SELL

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While I am looking at luxury companies which I could short, one should not forget that Piquadro, which I would call also a “Tier 2” brand, has issued its quarterly report just yesterday.

Unfortunately, Piquadro matches my “short thesis” quite well, with sales down significantly in its indirect channels and only relatively limited grwoth in the direct channel. Working capital increased which is a result of the increasing direct operated stores. In general, invested capital increased significantly, financed by additional debt.

So the change in the distribution model seems to be not a swift one as the Italian indirect sales really seem to melt away.

Time to go back to my initial investment thesis and valuation exercise.

My conservative case implied a 16% EBITDA margin. In the current quarter, we are at 1.77/11.3 = 15,67%, so optimistically we are within the conservative case regarding EBITDA Margin.

However if we look at the valuation grid that I used, we can clearly see that 2% growth was my worst case scenario for the conservative case:

Growth 2% 3% 4% 5% 6%
Discount            
  7% 2.06 2.57 3.43 5.14 10.28
  8% 1.71 2.06 2.57 3.43 5.14
  9% 1.47 1.71 2.06 2.57 3.43
  10% 1.29 1.47 1.71 2.06 2.57
  11% 1.14 1.29 1.47 1.71 2.06
  12% 1.03 1.14 1.29 1.47 1.71

In reality, EBITDA decreased by -29% vs. Q1 2011 and operating CF became negative. I have to admit, that looking back I kind of ignored that running own stores worldwide is a very different business model than selling wholesale in Italy.

As a consequence, I will sell down Piquadro from tomorrow on, as my initial thesis (international sales compensate domestic sales) clearly doesn’t play out.

There might be some takeover / going private speculation (the Samsonite CEO mentioned that they might be interested in Italian luggage makers after TUMI has become too expensive), but I am not willing to speculate on this.

Italian updates – Piquadro, Sol Spa, Emak

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Reporting season in Italy. Among my portfolio and watch list, several companies issued relevant material.

Piquadro:

Piquadro had a sort of “trading update” which for some reason cannot be found on the homepage but for instance here.

Although sales went up 4.3%, Profits declined from 9.1 mn to 7.8 mn (0.18 EUR per share to 0.156 EUR per share). And they are cutting the dividend from 0.10 EUR per share to 0.06 EUR.

Based on my initial valuation, Piquadro is still within the base case (20% EBITDA margin). So for the time being no action, but a reminder to check the annual report how non-Italien sales and own shops performed against the other segment.

Sol Spa

Watchlist stock Sol Spa has issued two interesting pieces of information. First of all, they were able to place a 12 year private placement bond at 4.75% in USD. With 12 year USD swap rates at around 2%, this represents a credit spread of around 2.75%. This is around 1.5% lower than Italy has to pay for the same duration. So we clearly see that a well managed Italian corporate can finance cheaper than the Italian Government !!!

Secondly, they have issued an investor presentation which shows that for some unkown reasons they are also investing in Hydro Power in Slovenia and Macedonia. I am not sure how this fits into the corporate strAtegy, but it explains part of the increase in Capex.

Q1 results are a mixed bag. Increasing sales but a reduction in margins. Capex still high as the aggressively move into Eastern Europe (Bulgaria, Albania).

Difficult stock. Still on watch.

EMAK

Emak had issued Q1 numbers already a couple of weeks ago. Interestingly again the acquired companies dare doing relatively well. Based on the first quarter, Emac could earn around 0.08 EUR per share which would result in a 2012 P/E of around 6.

Portfolio updates – Praktiker, Nestle, SIAS, Piquadro & TUMI

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Just to summarize some recent portfolio transactions:

Praktiker

In the last few days, Praktiker came back below my limit at 41%. So in toatl I bough now 641.000 nominal bonds at a “dirty price” including accrued interest of 41.62%. Clean price would be around 40.50%.

Nestle

As announced yesterday, I sold the Nestle shares at 54.47 CHF. Including 2 dividends, Nestle produced a positive performance of 24.17% for the portfolio.

I kept the CHF hedge, Vetropack is now 100% hedged.

SIAS

Also yesterday, I “pre” invested the SIAS dividend back into SIAS shares. Ex date was April 23rd, however payment date is April 26th.

Piquadro

Piquadro fell back below my buying limit of 1,50 EUR, so I will increase the position of currently 1%. Howver, tarding volume is relatively small. As always, I will sell short 50% of the purchase value with FTSE MIB ETFs.

The TUMI IPO by the way has been a great succes. The stock increased from 18 USD to 26 USD in the frist few trading days. This gives TUMI a valuation of 1.8 bn USD, which translates into P/S of 6 and EV/EBITDA of 30. Cpompared to this, Piquadro is valued at EV/EBITDA of 7 and P/S of 1.

I had hoped that the IPO of TUMI would represent some kind of “catalyst” event for Piquadro, but I think at the moment Piuqadro is overwhelmed by the Euro Crisis 2.0.

Finally, the net cash position of the portfolio after those transactions is currently 11.8%.

Quick news : Piquadro SpA – Tumi IPO coming soon

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I have mentioned Tumi several times as one of the major competitors of Piquadro in my small “series” about Piquadro.

Now it looks like that the Tumi IPO is finally happening . According to Bloomberg, they want to IPO on April 19th, with a quite optimistic valuation:

Demand for luxury goods is helping Doughty Hanson reduce its stake in Tumi, which it bought for $276 million eight years ago, longer than buyout firms typically hold investments. Tumi, whose backpacks retail for up to $595, is seeking a valuation of as much as 3.5 times 2011 sales, compared with the median of 0.6 times for a basket of peers, according to data compiled by Bloomberg.

I guess they are using P/S as a benchmark, because profits seem to be quite slim:

The luggage maker’s sales increased 31 percent to $330 million last year, while net income surged to $16.6 million from $104,000 in the same period, according to today’s filing. The company turned a profit for the first time in 2010 since at least 2007, the filing shows.

It is still amazing how the “pump and dump” strategy of those PE houses still work.

If we compare this to Piquadro, with multiples of 1.2 P/S and a P/E of 10, one can clearly see the impact of Anglo Saxon “financial magic”.

Piquadro itself seems to be reaching my threshold of 1.50 EUR again:

Below 1.50 EUR I will increase Piquadro to a half position (2.5%) of the portfolio, however in parallel I will increase the FTSE MIB hedge accordingly to hedge out my increasing Italian exposure.

Autostrada, Total Produce, Piquadro

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Autostrada

As mentioned yesterday, I sold my full Autostrada position at yesterday’s VWAP of 6.34 EUR per share, resulting in a loss of -7,88%. I will revisit Autostrada and especially SIAS, the operating subisidiary, once the cpaital increase is underway. Looking at EMAK and Unicredit, this could provide a more interesting entry point and compensating for the risk of unexpected transactions…..

Piquadro

Since yesterday, Piquadro trades below 1,50 EUR, which was my threshold for additional purchases. However, as I am currently much more pesimistic about China I will for the time being not purchase more Piquadro shares.

Total Produce

Total Produce issed preliminary annual fugures (thanks for the link to best_choice). Wexboy and Philipp O’Sullivan already commented on the results.

Positives were the turnaround in the Health foods segment, whereas the rest of the business slightly contracted. The “EHEC scare” was most likely contributing significantly to this decline.

What I don’t really like are the debt financed acquisitions. However the guidance for 2012 (7-8 cents a share) still leaves the company in the “dirt cheap” category.