whatdadil9 Posted September 22, 2016 Share Posted September 22, 2016 i dont have the exact stats in front of me.... What I will say is that the intent is too sell more v12s next year than last (f12 TDF rollout) and some others but I think you are missing the larger point which is: the super ltd edition cars are the ones that are massively oversubscribed all the time. we heard orderbook for LaFerrari Spyder was 100x oversubscribed. Literally. Its our belief that EVENTUALLY, Ferrari will do more "quickstrike" ltd. editions. 3,4,5 a year of 200-500 unit supercars where they are being massively oversubscribed and the secondary market is capturing all the margin. The uber wealthy guy will get on the list for all 5 super cars every year and get one... The key to exclusivity in many ways is that price in and of itself is exclusive. A lawyer can afford a 300k california after saving for 5years but will never be able to afford a 1-1.5mm La F. To a billionaire, its a drop in the bucket. To become a "true luxury brand", the company must grow and continue to expand its product offering where its customer is going...higher and higher. Loro Piana has started selling 60k baby cashmere jackets with furlining. AND THEY SELL. Previously the highest end jacket was closer to 5-10k.. This was put in after LVMH bought them. The billionaire class wants /will pay for 1mm++ cars. Thats where all the demand is! If done appropriately, ASP will trend alot higher over time.. Patek Phillipe has raised prices 8-10 pct a year for almost 30 years while increasing production by almost the same amount... Link to comment Share on other sites More sharing options...
whatdadil9 Posted September 22, 2016 Share Posted September 22, 2016 Every car is ordered so penetratiion for customization is misleading. its 100 pct. The argument is that there are more and more options that can help you drive asp higher... we suspect that it can add 15-20 pct when all is said and done to MSRP... but thats not where you get torque. You get torque on the 90+ pct incremental ebit margin on the 2mm car.. Link to comment Share on other sites More sharing options...
benjamin1978 Posted September 22, 2016 Share Posted September 22, 2016 That is all very impressive sounding but what exactly makes you think they're going to do a supercar every year let alone 3 - 5 LTDs each year? Doesn't that defeat the whole point of limited editions? Is this even possible from a design capacity perspective? Link to comment Share on other sites More sharing options...
benjamin1978 Posted September 22, 2016 Share Posted September 22, 2016 Every car is ordered so penetratiion for customization is misleading. its 100 pct. The argument is that there are more and more options that can help you drive asp higher... we suspect that it can add 15-20 pct when all is said and done to MSRP... but thats not where you get torque. You get torque on the 90+ pct incremental ebit margin on the 2mm car.. also, what is your source of the 90+ incremental margins. Is this just your belief or there's data behind it Link to comment Share on other sites More sharing options...
whatdadil9 Posted September 22, 2016 Share Posted September 22, 2016 LTDs are going to increase. its happening. they will never tell you tho. possible from design and capacity. ask cfo/sergio et. all.. they spoke to this at ipo roadshow. incremental ebit margin on california t is 70 pct. are parts and labor that much more on 1mm + dollar car? the assembly guy doesnt get paid 3x and neither are the parts... for all we know it could be higher.. R&D and f1 have obfuscated the profitability. as volumes and pricing grow and the ohter stuff stays constant the unit economics will become obvious here... Link to comment Share on other sites More sharing options...
benjamin1978 Posted September 22, 2016 Share Posted September 22, 2016 LTDs are going to increase. its happening. they will never tell you tho. possible from design and capacity. ask cfo/sergio et. all.. they spoke to this at ipo roadshow. incremental ebit margin on california t is 70 pct. are parts and labor that much more on 1mm + dollar car? the assembly guy doesnt get paid 3x and neither are the parts... for all we know it could be higher.. R&D and f1 have obfuscated the profitability. as volumes and pricing grow and the ohter stuff stays constant the unit economics will become obvious here... How committed are they to keeping fixed costs fixed? It's been steadily increasing and run-rating above 600 this year. Plus all the capitalized stuff is going to show up in amortization at some point, and incrementally the costs of producing higher number of SKUs too. Also, with how Scuderia is doing, if Malone takes those extra fees away from the team wouldn't RACE profitability take a hit? Perhaps if you're right the upside outweighs all the headwinds but i'd be curious to know the full picture Also, what about selling Financial Services? That's actually a very good business why is the deal a good thing for Ferrari? Link to comment Share on other sites More sharing options...
whatdadil9 Posted September 22, 2016 Share Posted September 22, 2016 financial services may be good but its lower ROIC then basically every other asset. Why not take the capital out of it and buyback stock in the better biz...makes 1000 pct sense to me. On F1..it is really poorly run and the way things are setup the teams participate in the profits of F1--> Ferrari being greatest benficiary. Bernie completely mismanaged the asset and John Malone is no dumby. I supsect new media deals and bringing hte sport to new markets will increase profitability substantially. We see f1 as upside not downside. Fixed costs are coming down. Sergio said at IPO roadshow. 100mm in R&D by end of 2017.. He also said on conference call his chair is wood and that they are running relatively low cost.. not sure I agree with that given Luca's profligate spending and the bonuses we heard that execs were getting.. That being said, Sergio is cleaning house and suspect that over time fixed costs have a better shot of going down not UP. Link to comment Share on other sites More sharing options...
benjamin1978 Posted September 22, 2016 Share Posted September 22, 2016 financial services may be good but its lower ROIC then basically every other asset. Why not take the capital out of it and buyback stock in the better biz...makes 1000 pct sense to me. On F1..it is really poorly run and the way things are setup the teams participate in the profits of F1--> Ferrari being greatest benficiary. Bernie completely mismanaged the asset and John Malone is no dumby. I supsect new media deals and bringing hte sport to new markets will increase profitability substantially. We see f1 as upside not downside. Fixed costs are coming down. Sergio said at IPO roadshow. 100mm in R&D by end of 2017.. He also said on conference call his chair is wood and that they are running relatively low cost.. not sure I agree with that given Luca's profligate spending and the bonuses we heard that execs were getting.. That being said, Sergio is cleaning house and suspect that over time fixed costs have a better shot of going down not UP. To clarify, you mean R&D is going down by 100 mil by end of 2017? Interesting, thanks for the info I didn't make it to the IPO. But what do you think they sold financial services for? I hope it's many multiple of book value. I disagree the ROIC on that business is low though....they basically finance it entirely with debt, very little equity in that business, charge 3, 4% rates and i'm guessing basically nobody defaults, or even if defaults the collateral is sold at healthy prices given it's Ferrari. I hope they didn't sell it cheaply, I think they wouldn't, but I wish they would disclose the terms before the deal closes. Link to comment Share on other sites More sharing options...
whatdadil9 Posted September 22, 2016 Share Posted September 22, 2016 Yes 100m in total by year end 17. We didn't say it was low roic. We just said it much lower than every other biz they have. If they loan at 3 to 4pcct what do they borrow at? What's the spread? Even with low cost debt it's nnot that great. Market is penalizing race for the finance biz bc luxury good investors don't back it out of the ev. The way we see it it simplifies things. You take 2bn of debbt off the balance sheet whether it's recourse or not. Simplifies the capital structure. Allows them to take the cash and buybakk stock in the higher roic biz or invest in smthg else. Financials are commodities and a Ferrari is anything but! When have you heard someone say that a lending biz is the best business in the world???! Never. And when it is the govt shuts it down like payday lending, pawn, timeshare etc. Link to comment Share on other sites More sharing options...
benjamin1978 Posted September 22, 2016 Share Posted September 22, 2016 Yes 100m in total by year end 17. We didn't say it was low roic. We just said it much lower than every other biz they have. If they loan at 3 to 4pcct what do they borrow at? What's the spread? Even with low cost debt it's nnot that great. Market is penalizing race for the finance biz bc luxury good investors don't back it out of the ev. The way we see it it simplifies things. You take 2bn of debbt off the balance sheet whether it's recourse or not. Simplifies the capital structure. Allows them to take the cash and buybakk stock in the higher roic biz or invest in smthg else. Financials are commodities and a Ferrari is anything but! When have you heard someone say that a lending biz is the best business in the world???! Never. And when it is the govt shuts it down like payday lending, pawn, timeshare etc. I think 3% is their net interest margin, after cost of financing. In the case of captive auto finance, it actually tends to be a pretty good business and Ferrari brand just makes it more so. IMO lending against a Ferrari as an OEM is very low risk, basically no competition unless you allow the dealers and charge them a fee. Kind of like free money. If you have access, please ask them how good of a deal they've gotten from FCA. Link to comment Share on other sites More sharing options...
benjamin1978 Posted September 22, 2016 Share Posted September 22, 2016 Yes 100m in total by year end 17. We didn't say it was low roic. We just said it much lower than every other biz they have. If they loan at 3 to 4pcct what do they borrow at? What's the spread? Even with low cost debt it's nnot that great. Market is penalizing race for the finance biz bc luxury good investors don't back it out of the ev. The way we see it it simplifies things. You take 2bn of debbt off the balance sheet whether it's recourse or not. Simplifies the capital structure. Allows them to take the cash and buybakk stock in the higher roic biz or invest in smthg else. Financials are commodities and a Ferrari is anything but! When have you heard someone say that a lending biz is the best business in the world???! Never. And when it is the govt shuts it down like payday lending, pawn, timeshare etc. Last question, really appreciate sharing your thoughts. What do you think is the normalized capex for this business. 375 mm seems like a lot for a company that makes less than 10k cars and basically no need to build new capacity? what are they capexing on exactly Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted September 22, 2016 Share Posted September 22, 2016 Yes 100m in total by year end 17. We didn't say it was low roic. We just said it much lower than every other biz they have. If they loan at 3 to 4pcct what do they borrow at? What's the spread? Even with low cost debt it's nnot that great. Market is penalizing race for the finance biz bc luxury good investors don't back it out of the ev. The way we see it it simplifies things. You take 2bn of debbt off the balance sheet whether it's recourse or not. Simplifies the capital structure. Allows them to take the cash and buybakk stock in the higher roic biz or invest in smthg else. Financials are commodities and a Ferrari is anything but! When have you heard someone say that a lending biz is the best business in the world???! Never. And when it is the govt shuts it down like payday lending, pawn, timeshare etc. Last question, really appreciate sharing your thoughts. What do you think is the normalized capex for this business. 375 mm seems like a lot for a company that makes less than 10k cars and basically no need to build new capacity? what are they capexing on exactly I think the answer lies in the massive Formula 1 team expenses. The attached screenshot is from the 2015 annual report. My view is that the money spent on Formula 1 should be viewed as capitalized marketing expenses. Here are two more relevant quotes from the 2015 annual report: "Our name and history and the image enjoyed by our cars are closely associated with our Formula 1 racing team, Scuderia Ferrari, the most successful team in Formula 1 history." "We focus our marketing and promotion efforts in the investments we make in our racing activities, in particular Scuderia Ferrari’s participation in the Formula 1 World Championship." Link to comment Share on other sites More sharing options...
benjamin1978 Posted September 22, 2016 Share Posted September 22, 2016 Yes 100m in total by year end 17. We didn't say it was low roic. We just said it much lower than every other biz they have. If they loan at 3 to 4pcct what do they borrow at? What's the spread? Even with low cost debt it's nnot that great. Market is penalizing race for the finance biz bc luxury good investors don't back it out of the ev. The way we see it it simplifies things. You take 2bn of debbt off the balance sheet whether it's recourse or not. Simplifies the capital structure. Allows them to take the cash and buybakk stock in the higher roic biz or invest in smthg else. Financials are commodities and a Ferrari is anything but! When have you heard someone say that a lending biz is the best business in the world???! Never. And when it is the govt shuts it down like payday lending, pawn, timeshare etc. Last question, really appreciate sharing your thoughts. What do you think is the normalized capex for this business. 375 mm seems like a lot for a company that makes less than 10k cars and basically no need to build new capacity? what are they capexing on exactly I think the answer lies in the massive Formula 1 team expenses. The attached screenshot is from the 2015 annual report. My view is that the money spent on Formula 1 should be viewed as capitalized marketing expenses. Here are two more relevant quotes from the 2015 annual report: "Our name and history and the image enjoyed by our cars are closely associated with our Formula 1 racing team, Scuderia Ferrari, the most successful team in Formula 1 history." "We focus our marketing and promotion efforts in the investments we make in our racing activities, in particular Scuderia Ferrari’s participation in the Formula 1 World Championship." No I think most of the F1 stuff is expensed as R&D on the P&L. But you're right there is a capitalized R&D component included in capex which sounds like basically product development costs. Which is why i feel like is important to know whether product-related costs scale up or down as they increase SKUs Link to comment Share on other sites More sharing options...
whatdadil9 Posted September 22, 2016 Share Posted September 22, 2016 Again, if you attended the roadshow Sergio was very clear auto capex is about 100mm. We also think it supports much higher production 20-30k ... Link to comment Share on other sites More sharing options...
benjamin1978 Posted September 22, 2016 Share Posted September 22, 2016 Again, if you attended the roadshow Sergio was very clear auto capex is about 100mm. We also think it supports much higher production 20-30k ... They really should just cancel the dividend Link to comment Share on other sites More sharing options...
whatdadil9 Posted September 22, 2016 Share Posted September 22, 2016 They are going to sell financial services and buyback the crap out of the stock....its gonna be really exciting. Link to comment Share on other sites More sharing options...
benjamin1978 Posted September 23, 2016 Share Posted September 23, 2016 So why not just buy back stock now? Why worry so much about less than 1x of industrial leverage? Just because every other carmaker has net cash, except Fiat - but haven't they already decided that RACE is not a carmaker anyways but a luxury goods company? Link to comment Share on other sites More sharing options...
Spekulatius Posted September 23, 2016 Share Posted September 23, 2016 The Stock is fairly expensive, why would they buy back now? While I consider RACE a luxury good maker, the business can be highly cyclical and they would need to keep spending in a downturn on F1 to stay true to their image. I guess the large number f product variants (limited editions) pushes up Capex. I don't see how they could make variants of their existing cars without making new tools etc. Even if they don't produce these parts themselves, they still would need to pay their suppliers for the one time expenses. Link to comment Share on other sites More sharing options...
KCLarkin Posted September 23, 2016 Share Posted September 23, 2016 the business can be highly cyclical Given the waiting lists, is Ferrari really that cyclical? Link to comment Share on other sites More sharing options...
benjamin1978 Posted September 23, 2016 Share Posted September 23, 2016 The Stock is fairly expensive, why would they buy back now? While I consider RACE a luxury good maker, the business can be highly cyclical and they would need to keep spending in a downturn on F1 to stay true to their image. I guess the large number f product variants (limited editions) pushes up Capex. I don't see how they could make variants of their existing cars without making new tools etc. Even if they don't produce these parts themselves, they still would need to pay their suppliers for the one time expenses. oh my. Link to comment Share on other sites More sharing options...
whatdadil9 Posted September 23, 2016 Share Posted September 23, 2016 capex will not go up. not cyclical see 2008. F1 spending coming down. Go listen to roadshow. This is what makes a market...people not doing their work. Link to comment Share on other sites More sharing options...
benjamin1978 Posted September 23, 2016 Share Posted September 23, 2016 is there recording of the IPO roadshow? Link to comment Share on other sites More sharing options...
whatdadil9 Posted September 23, 2016 Share Posted September 23, 2016 nope. beauty of the process. Link to comment Share on other sites More sharing options...
Spekulatius Posted September 24, 2016 Share Posted September 24, 2016 capex will not go up. not cyclical see 2008. F1 spending coming down. Go listen to roadshow. This is what makes a market...people not doing their work. NAh, I'd rather get it spoon fed. I was not aware of any Roadshow, since it is not on their website. As far as Capex is concerned, if it is not needed to support the manufacturing, what is than needed for? I am always a bit skeptical, when there is a claim that incremental volume can be done with very little additional expenses. Als, their F1 expenses, depend on how they are doing relative to other teams. If the other teams step up their game (sponsored by large auto companies) and Ferrari falls behind, they would need to step up, because they cannot afford to be the laughing stock of Formula 1, if they sell performance cars selling for half a million. That is what they had to do in the nineties when they fell behind - they hired Michael Schumacher for a fortune and spent money to get their car performance up to where they could win. That's the core of their business and not a discretionary expense. Link to comment Share on other sites More sharing options...
fareastwarriors Posted September 28, 2016 Share Posted September 28, 2016 Why It Takes More Than Money to Buy a Special-Edition Ferrari Getting on a wait list also can require a friendly dealer and patience; celebrity doesn’t hurt either http://www.wsj.com/articles/why-it-takes-more-than-money-to-buy-special-edition-ferrari-1475013552 Link to comment Share on other sites More sharing options...
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