FCAU - Fiat Chrysler Automobiles

[Mephistopheles]

Does anyone know when the ex-right date is? The date after which FCAU will reprice? Or have they not published it yet?

[SwimmingNaked]

Anyone who felt the SoftBank pain (me) knows all too well the danger of being long a SOTP stock where half the value is being driven by a hyped up stock.  The market really cares about NAV, not the percentage stub on the stock. 

 

In these situations you have almost none of the upside from RACE but all the downside by owning FCAU.  You need the core FCAU to do well, RACE is irrelevant at this point.

 

I would invest in Ferrari shares at the current price. I would also invest in FCA at a (conservative) ex-Ferrari valuation of ~2x '16 EV/EBITDA and ~3-4x '16 EV/EBIT, with a very credible plan to do $4+ in EPS in 2-3 years (plus optionality to some realistic scenarios with even more upside to this). This is not your typical stub trade where the only rationale for investment is a discount to current sum of the parts (people sometimes fail to account for how the value of those parts will change over time), both pieces of the puzzle are attractive investments on a standalone basis. Ferrari is hardly overpriced or overhyped, the market is not really pricing in margin expansion from the operating leverage in the business, if it were it would realize that Ferrari is a potential double over current valuation in 2-3 years. The business has pricing power, has proven itself resilient in economic downturns, and has other levers for growth on top of the increased car deliveries. I will not be selling a single Ferrari or FCA share upon reception, I'm happy investing in both sides of the story. I have no idea how the short term trade will work out though, RACE price could see short term pressure from a less limited float and some investors seeing FCA's cheap valuation as the more attractive investment, FCA could see pressure if those who wanted it for RACE or a quick "event driven" trade sell...no clue how that will work out, but weird short term moves in either name wouldn't surprise me.

[TwoCitiesCapital]

http://seekingalpha.com/pr/15445896-fca-us-llc-announces-redemption-of-all-of-its-outstanding-8-percent-secured-senior-notes-due-2021-and-termination-of-its-1_3-billion-revolving-credit-facility

 

Not big news, but they're retiring $3B in debt early.

[merkhet]

http://seekingalpha.com/pr/15445896-fca-us-llc-announces-redemption-of-all-of-its-outstanding-8-percent-secured-senior-notes-due-2021-and-termination-of-its-1_3-billion-revolving-credit-facility

 

Not big news, but they're retiring $3B in debt early.

 

Actually, I think it's a pretty big step towards getting the ring-fence around Chrysler down. Next up...

 

The second of the RCF's two ¬2.5 billion tranches will become available upon the elimination of the contractual restrictions under the FCA US financing documentation on the provision of guarantees and payment of dividends by FCA US for the benefit of the rest of the Group, which is expected to occur in the first half of next year.

 

Once they take the ring-fence down, their borrowing costs should plummet.

[ratiman]

Most of you are probably familiar with most of the arguments in here. Found on twitter.

 

FIAT does not stand for "Fix it again Tony"

 

bit.ly/1Nl5HSn 

 

By the way, my parents owned a FIAT. The exhaust fumes came up through the back seat.

[berkshiremystery]

Fiat Chrysler new Star Wars TV commercial's

 

May the force be with FCAU  ;)

 

 

 

http://www.detroitnews.com/story/business/autos/chrysler/2015/12/02/fiat-chrysler-star-wars-launch-co-branded-ads/76694834/

 

 

http://www.forbes.com/sites/dalebuss/2015/12/02/fiat-chrysler-brands-leverage-the-force-in-ad-campaign-tied-to-new-star-wars-movie/

 

http://instagify.com/media/1123240191062152755_1739423300

 

 

 

 

http://2.bp.blogspot.com/-OuYQjeKeWlA/VlYJyk-n8OI/AAAAAAAAr-E/RTC1SkLgH3c/s1600/Fiat_500_Star_Wars-c.jpg

Source: http://2.bp.blogspot.com/-OuYQjeKeWlA/VlYJyk-n8OI/AAAAAAAAr-E/RTC1SkLgH3c/s1600/Fiat_500_Star_Wars-c.jpg

http://www.fiat500usa.com/2015_11_01_archive.html

 

 

 

 

 

 

 

 

 

 

 

[phil_Buffett]

http://www.autonews.com/article/20151203/OEM02/151209936/marchionne-says-fca-does-not-plan-hostile-bid-on-gm-will-focus-on

 

http://www.reuters.com/article/2015/12/03/idUSI6N13B02420151203#dzSSeiRCMyOgjlIQ.97

[muscleman]

IB showed me that FCAU is annoucing a 1:10 reverse split. I wonder why they wanted to do that.  :o

[simplefocus]

I thought 1:10 was the spinoff ratio.  For every 10 shares of FCAU, you'll get 1 share of RACE.

[karthikpm]

I thought 1:10 was the spinoff ratio.  For every 10 shares of FCAU, you'll get 1 share of RACE.

 

I thought it was happening in January? Is it already done?

[simplefocus]

Yes, it's probably the first week of January.  Since January is just around the corner, I guess some brokers are already prepping the spinoff.

[merkhet]

I thought 1:10 was the spinoff ratio.  For every 10 shares of FCAU, you'll get 1 share of RACE.

 

I thought it was happening in January? Is it already done?

 

January 4th. First trading day of the new year.

[fareastwarriors]

FCA and Ferrari Announce Timing and Additional Details of Ferrari Separation

 

 

 

 

http://www.nasdaq.com/press-release/fca-and-ferrari-announce-timing-and-additional-details-of-ferrari-separation-20151222-00336

[whatdadil9]

Is it just me or is it weird FCAU is not going up into the spin off of RACE?

 

Its almost as if everyone who wanted to own Ferrari played it thru FCAU until RACE was floated. Now that RACE is independent they can buy that instead.

 

I myself like the 5-6.00 a share of earnings power from FCAU in 2018. When you factor in 10bn of synergies from a deal with GM to be split 50/50 or even 30/70 at 10x EBIT thats probably at least another 20.00 a share of value also. We can't forget about a sale/spin of parts either...

 

I myself like Ferrari as a standalone investment and probably wont sell my shares. I think the presentation by ADW Capital seems pretty germaine and while aggressive certainly seems in the realm of possibility. That deck can be downloaded on their website at:

www.adwcapital.com

 

But all that being said, if people were in Fiat for Ferrari wouldnt they be buying it ahead of the spin which is in 4 days?

 

Perhaps we get our shares of Ferrari and FCAU doesnt trade down? Is that a possbility? Whats happening now makes very little sense.

[argonaut]

I'm curious if anyone is adding to their positions in FCAU as a short term play right now?

[karthikpm]

I'm curious if anyone is adding to their positions in FCAU as a short term play right now?

 

Not sure what the catalyst would be short term.After Ferrari spin off, both FCAU and RACE will trade lower [ More RACE shares available to trade ]

[fareastwarriors]

Jeep Boosting Sales to Car-Rental Firms

 

Top-selling brand is turning to fleet buyers, as dealer inventories of pricey sport-utility rise

 

 

http://www.wsj.com/articles/jeep-boosting-sales-to-car-rental-firms-1451349252

[compounding]

I'm curious if anyone is adding to their positions in FCAU as a short term play right now?

 

Not sure what the catalyst would be short term.After Ferrari spin off, both FCAU and RACE will trade lower [ More RACE shares available to trade ]

 

Of course, everyone has differing definitions of short-term. But for me one short-term value-creating event will be the removal of the ring-fencing of FCA US's cash flows. Perhaps you could also argue that higher interest rates could be a near term catalyst in these names with large underfunded pensions. Sadly nothing seems to have materialised from the talks with the UAW about finding better solutions for this great liability. Other things that could happen in the next year: 1) they keep (positively) surprising with NAFTA performance in a continually healthy market 2) Sergio value creation through financial engineering or M&A activity 3) their plan for the company with regards to improving ROIC through globalising Alfa, Maserati and Jeep might make a difference.

 

As for your second argument, obviously FCAU will trade lower after the spinoff, even trading higher than [FCAU-RACE] would be surprising to me. Keep in mind that RACE has always been a solid contributor to protecting the downside in this name - without that protection, logically FCAU deserves a lower multiple. You could also think about FCAU today as being valued as a blended company that has a higher value than it will post-spinoff. However I fail to see why RACE ought to trade lower due to the increased amount of shares, if anything it should trade higher due to the increased liquidity. I mean the amount of shares a company has available for trade has zero impact on the valuation, so why would the price change? Guess this boils down to how inefficient you think the market is, but I just can't see how the market would be materially wrong on something like this.

[yitech]

Jeep Boosting Sales to Car-Rental Firms

 

Top-selling brand is turning to fleet buyers, as dealer inventories of pricey sport-utility rise

 

 

http://www.wsj.com/articles/jeep-boosting-sales-to-car-rental-firms-1451349252

 

Could this potentially cheapen the Jeep brand?

[whatdadil9]

So if you agree that RACE wont go down post spin...How do you justify the valuation of FCAU ex-RACE if RACE is static/goes up?

 

 

[SwimmingNaked]

The Power Of Oratory

Bernstein - The Power Of Oratory -  29102015

 

The bear case, if you guys are looking for one, is in this report. I suspect when you assess the quality of the analysis in this report, it will only add to your conviction as a long. Guessing Mr. Warburton is still a bit butthurt from Sergio telling him to "reconsider his ambitions in life" on the Q1 '15 conference call.

[SwimmingNaked]

At 8100 cars sold, Ferrari will do around 700-750 million euros in EBIT in '16 (this is while being pretty conservative, so 750+ is possible, if not likely). Valuation as of today is 9 billion USD. I don't know how anyone makes the case that Ferrari is overvalued and doesn't have the earnings to support its current valuation. There are definitely people out there who think Ferrari is being held up by a limited float, I remember hearing this kind of chatter during the IPO, but these are also people who don't have a clue about what's going on with the company, so who cares?

 

Ferrari is more undervalued than overvalued, even more so when you look ahead to '17. And FCA ex-Ferrari is ridiculously undervalued. So how do we justify the current FCA stock price which seems absurd based on any kind of a rational analysis? I don't know, market just gives you a gift sometimes and you have to accept it. I have no idea how the short term trade works out, but the mispricing here is incredible.

[whatdadil9]

Swimming,

 

I could NOT AGREE WITH YOU MORE. I think ADW Capital's presentation highlights the real call optionality around Ferrari and is prob more likely than non likely...

 

That being said, Sergio has dug himself in some type of hole lashing out at sellside and the attempts on GM seem desperate given they make EXTREME economic sense. I also think mary / old GM culture is in desperate need of rehaul....conversation for another day but the synergy value in merger of equals is prob worth double FCA market cap. 10bn synergy (50% to GM and 50% to FCA) X 10 on EBIT is 50bn/1.5bn shares over 30 a share....

 

But the facts remain the same, I struggle with how FCA gets valued appropriately. Whether it trades at 5x or 1x EPS, investors seem to be focused that its "peak earnings".  The idea that breakevens are lower and company's should trade on  "normalized" EPS is pretty much a lost cause. The idea among alot of people is that its peak SAAR and you dont want to own an auto company at any price when it turns. Whether its in 1 year or in 4 years.

 

I personally think and I think Sergio seemed to communicate on the most recent roadshow that the plan is achievable with a good deal of flexibility in US SAAR. Hes given himself alot of room on interest expense alone ~.70 when you look at his new targeted liquidity/net debt amount...

 

I just think we are fighting a larger philosphical issue being that Sergio somehow told us autos are a bad biz and that no one wants to own "peak saar" even if  Mike Jackson of auto nation says we will be here for years....correlations with SAAR and auto sales, population adjustments, etc.

[karthikpm]

http://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2016/january/Separation_of_Ferrari_from_FCA_Completed.pdf

[jay21]

Im trying to wrap my head around Fiat and autos again as we enter this spin because I will have to think about selling RACE and buying FCAU. I look at GM quickly and its trading at ~6x adjusted earnings, generating FCF, and has a net cash position. I expect new FCAU to trade lower on a EV/EBITDA basis given the net debt and lack of FCF. As capital structure gets optimized and we see some continued growth and declining capex, the values should converge depending on your view of the portfolios.

 

But my fundamental question is what will cause the auto industry to re-rate higher? I mean GM looks solid and is trading pretty low. Maybe there is some litigation overhang and bankruptcy stigma. Or maybe people think we are at peak SAAR?

 

Im glad to sit on something that has CF yields in the teens but I am not sure what causes a rerating of the industry. And there still is some risk on hitting a FCF inflection point for FCAU.