dowfin1 Posted January 6, 2014 Share Posted January 6, 2014 The way I look at Fiat and GM is via the car purchasing cycle and pent-up demand. Peter Lynch has a great description of this in his "Beating the Street" book in Chapter 15. Car demand has essentially grown slowly over time but is cyclical over time. Before 2008, there was an oversupply but since then there has been 2008/2009 which reduced demand temporarily and physically destroyed inventory (cash for clunkers). By my calcs, we still have some pent-up demand to supply. This may flip in the next few years. In this case the most levered play would go up the most but you also need excellent management which you have. If Fiat jumped to the high teens to low 20s, I would seriously consider selling. Other data points are Morningstar's analysis and Greenwood's case. Packer Packer, In his table, Lynch estimates 15.4m units as the LT trend for 1993. I assume it's grown at an annual rate since then, perhaps a percentage of the US household formation growth rate. Do you have a ballpark trend figure (US auto and light truck) for 2013/2014? If you don't mind sharing, what is your estimate of the current # of units of pent up demand. Thanks. I find your opinions very insightful. Link to comment Share on other sites More sharing options...
Packer16 Posted January 6, 2014 Share Posted January 6, 2014 If we take the average from 2002 to 2007 of LV unit sales we get 16.7 million units. If we assume LT average is 16m (conservative assumption because total consumption is up about 17% now from the 2002 to 2007 average), then pent up demand is 18.3 m units if we assume LT average is 15m there is pent up demand of 12.3m units. So based upon these top level numbers we are closer to 1984 in the 1980s cycle. Another indication he mentions used car prices are firm also. Packer Link to comment Share on other sites More sharing options...
kmukul Posted January 6, 2014 Share Posted January 6, 2014 Amazing, I thought the Hyundai preferred appreciated quite a lot last year - amazing it's still trading less than 1x EBITDA If you look at the numbers for the Hyman presentation before the Chrysler deal you will see Fiat is cheaper and after the deal it is more so. It the preferred sell at discount, then it is cheaper but probably at peak margins. I think the story behind Fiat is that they are not a peak margins and thus can improve going forward. BTW the Hyundai preferreds are even cheaper yet at less than 1x EBITDA. Packer Why not buy Hyundai at at less then 1X ebidta, its cheaper then FIATY and a very well known and respected brand for most of world esp asia (china and india) Link to comment Share on other sites More sharing options...
muscleman Posted January 6, 2014 Share Posted January 6, 2014 Amazing, I thought the Hyundai preferred appreciated quite a lot last year - amazing it's still trading less than 1x EBITDA If you look at the numbers for the Hyman presentation before the Chrysler deal you will see Fiat is cheaper and after the deal it is more so. It the preferred sell at discount, then it is cheaper but probably at peak margins. I think the story behind Fiat is that they are not a peak margins and thus can improve going forward. BTW the Hyundai preferreds are even cheaper yet at less than 1x EBITDA. Packer Why not buy Hyundai at at less then 1X ebidta, its cheaper then FIATY and a very well known and respected brand for most of world esp asia (china and india) Which broker allows this? I can't do it with IB. ::) Link to comment Share on other sites More sharing options...
yitech Posted January 6, 2014 Share Posted January 6, 2014 Amazing, I thought the Hyundai preferred appreciated quite a lot last year - amazing it's still trading less than 1x EBITDA If you look at the numbers for the Hyman presentation before the Chrysler deal you will see Fiat is cheaper and after the deal it is more so. It the preferred sell at discount, then it is cheaper but probably at peak margins. I think the story behind Fiat is that they are not a peak margins and thus can improve going forward. BTW the Hyundai preferreds are even cheaper yet at less than 1x EBITDA. Packer Why not buy Hyundai at at less then 1X ebidta, its cheaper then FIATY and a very well known and respected brand for most of world esp asia (china and india) I invested in Hyundai Preferred class 1 for a few months and got out because of the limited capacity of the North American plants could not expand enough to take up the demand. As well, the yen headwind will keep on coming as their Japanese rivals can price their products much more competitively due to the Abenomics money printing. That said, Hyundai preferreds are still way too cheap. As Packer mentioned, Hyundai class 3 preferred were a net net half a years ago. Link to comment Share on other sites More sharing options...
jay21 Posted January 6, 2014 Share Posted January 6, 2014 The Big 3 are "fielding their best cars in a generation while they are saddled with an image for building poor-quality models. To dealers like Stewart, the solution is simple -- cut prices. Yet GM, Ford Motor Co. and Chrysler Group LLC have promised not to sacrifice their growing profitability by falling into old habits of deep discounting." http://www.bloomberg.com/news/2014-01-06/made-in-america-gets-better-as-price-drives-better-sales.html?cmpid=yhoo Let's hope the rational pricing continues. It only takes one guy to undercut for share to make me worried that all will follow. The article points to the 29k Mercedes being priced lower than some domestics. Link to comment Share on other sites More sharing options...
Avyalake Posted January 6, 2014 Share Posted January 6, 2014 http://analysisreport.morningstar.com/stock/archive?t=FIATY®ion=USA&culture=en-US&productcode=MLE&docId=622689 Our $19 fair value estimate also includes the assumptions that 2014 European new-vehicle demand will remain weak but possibly perk up just a bit in the second half, offset by flat passenger-car demand in the Brazilian market. In addition, cost savings from the Fiat-Chrysler integration should begin to emerge in 2014, masked by continued Italian operating losses, with substantially improved operating leverage building in 2015 and beyond. Given the stark contrast between our base revenue and EBITDA margin assumptions against management's revenue forecast and EBITDA margin target ranges for a fully integrated Fiat-Chrysler, the $19 fair value estimate generated by our discounted cash-flow model looks very realistic, bolstering our assessment that the market just doesn't get it--meaning that Fiat stock currently trades at a very compelling valuation. Link to comment Share on other sites More sharing options...
nikhil25 Posted January 6, 2014 Share Posted January 6, 2014 Likely U.S. listing to further sideline Italy in Fiat-Chrysler group http://www.reuters.com/article/2014/01/05/us-fiat-chrysler-idUSBREA040CM20140105 Link to comment Share on other sites More sharing options...
racemize Posted January 6, 2014 Share Posted January 6, 2014 Likely U.S. listing to further sideline Italy in Fiat-Chrysler group http://www.reuters.com/article/2014/01/05/us-fiat-chrysler-idUSBREA040CM20140105 what happens to the Milan shares and OTC shares if they do this move? Do they all consolidate? Link to comment Share on other sites More sharing options...
constructive Posted January 6, 2014 Share Posted January 6, 2014 Likely U.S. listing to further sideline Italy in Fiat-Chrysler group http://www.reuters.com/article/2014/01/05/us-fiat-chrysler-idUSBREA040CM20140105 what happens to the Milan shares and OTC shares if they do this move? Do they all consolidate? Most likely they would convert the OTC ADRs to shares in a new US holding company, and convert the Italian shares to GDRs. Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 6, 2014 Share Posted January 6, 2014 China Urges Chrysler to Fix Jeep Wrangler Problems http://online.wsj.com/news/articles/SB10001424052702304617404579304101231432362?mod=WSJ_business_whatsNews Link to comment Share on other sites More sharing options...
Grenville Posted January 6, 2014 Share Posted January 6, 2014 I'm a little late on this idea. Just starting the diligence. Had a question for board members. What is the equivalent to the 10K when researching FIATY? The reason I ask is that in the US, the 10K and annual report are different. One can be a marketing document without all the relevant details. I found the annual report on Fiaty's website. I just want to make sure there isn't another place I should look. 20F I believe. LC, Thanks. I couldn't find the 20F for 2012 on the Fiat website. All I find is the annual report. Ah sorry...I don't think they are required to file a 20F anymore as they are not listed on the NYSE. Only the ADR is. So I believe it is just the annual report and the mid-year (transitional?) report. But their I/R page has regular information releases that are more current as well. Thanks for the information. That makes sense. I've been slowly working through the 2012 AR. Link to comment Share on other sites More sharing options...
Ian L Posted January 6, 2014 Share Posted January 6, 2014 Most likely they would convert the OTC ADRs to shares in a new US holding company, and convert the Italian shares to GDRs. Then the vast majority of the shares would be GDRs, which Im sure many Fiat shareholders would not appreciate. Would there be any reason not to be able to make it a dual listing? Link to comment Share on other sites More sharing options...
Phaceliacapital Posted January 6, 2014 Share Posted January 6, 2014 Isn't CNHI (the old Fiat Industrial) traded on both the BIT and NYSE? Link to comment Share on other sites More sharing options...
muscleman Posted January 6, 2014 Share Posted January 6, 2014 GreenWood Investors said Fiat is heavily shorted in Italy exchange. Does anyone get the data? Link to comment Share on other sites More sharing options...
constructive Posted January 7, 2014 Share Posted January 7, 2014 Most likely they would convert the OTC ADRs to shares in a new US holding company, and convert the Italian shares to GDRs. Then the vast majority of the shares would be GDRs, which Im sure many Fiat shareholders would not appreciate. Would there be any reason not to be able to make it a dual listing? I think you're right, I was wrong. http://www.foxbusiness.com/industries/2014/01/03/report-fiat-chrysler-aims-for-2014-ipo/ CNH Industrial (CNHI), Fiat’s sister company that makes heavy machinery and vehicles, would be used as a template for corporate structure. The industrials group is a Netherlands-registered company that is listed in New York and Milan. Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 7, 2014 Share Posted January 7, 2014 http://online.wsj.com/news/articles/SB10001424052702304617404579306282588892164?mod=WSJ_business_whatsNews Brazil Posts First Drop in Auto Sales in a Decade In terms of passenger-car sales, General Motors Co. was the market leader in December, with 50,845 cars sold. However, for the year Fiat F.MI SpA once again was the market leader, selling 604,297 cars in 2013 and 50,581 cars in December. Volkswagen AG came in third place for the month but surpassed GM in terms of annual sales. Ford had the fourth-largest share of the market in December as well as for all of 2013. Link to comment Share on other sites More sharing options...
nikhil25 Posted January 7, 2014 Share Posted January 7, 2014 Fiat's Mirafiori production revamp imminent, say union sources http://in.reuters.com/article/2014/01/07/us-fiat-mirafiori-idINBREA060YD20140107 (Reuters) - Fiat (FIA.MI) will begin modifying production lines at its Mirafiori plant in northern Italy very soon, union sources said on Tuesday, suggesting the company is making good on its pledge to safeguard car manufacturing in its domestic market. Moody's says Fiat's Chrysler purchase to materially weaken liquidity http://www.reuters.com/article/2014/01/07/fiat-chrysler-moodys-idUSL6N0KH2XP20140107 "The announced acquisition will materially weaken Fiat's liquidity position at a time when the company is still free cash flow negative," said Falk Frey, Moody's senior vice president and lead analyst for Fiat. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted January 7, 2014 Share Posted January 7, 2014 GreenWood Investors said Fiat is heavily shorted in Italy exchange. Does anyone get the data? The BB terminal says that the info is not available for the Borsa Italiano.. Link to comment Share on other sites More sharing options...
phil_Buffett Posted January 8, 2014 Share Posted January 8, 2014 http://www.forbes.com/sites/halahtouryalai/2014/01/07/the-story-behind-chrysler-and-fiat-and-why-the-stock-is-so-cheap/ Link to comment Share on other sites More sharing options...
Sunrider Posted January 8, 2014 Share Posted January 8, 2014 I'm sorry since this would've almost definitely been asked/answered somewhere in here - but I'm flabbergasted by the Forbes article. Are those numbers correct? 8bn in EBITDA at a roughly 8bn market cap? Seems ridiculously cheap (yes I know there's debt) ... but still, are these figures right? A short answer would be great to tell me whether it's worthwhile continuing to dig around ... (Disclosure - I've mainly ignored this threat since, as a European, I'm wedded to the thought that Fiat produces pretty much only crap in the mass market. Not a good basis for investment decisions, I know and of course a very sweeping generalisation.) Thank you! C. Link to comment Share on other sites More sharing options...
SwedishValue Posted January 9, 2014 Share Posted January 9, 2014 I didn't check the exact numbers but yes, FIAT trades at a very low EV/EBITDA multiple. However, depreciation is a very real cost for any car manufacturer. Do as you would with any other business and try to estimate the FCF or Owner Earnings of the company going forward and you will get a much more reasonable (but in this case probably still cheap) multiple. Link to comment Share on other sites More sharing options...
goldfinger Posted January 9, 2014 Share Posted January 9, 2014 (Disclosure - I've mainly ignored this threat since, as a European, I'm wedded to the thought that Fiat produces pretty much only crap in the mass market. Not a good basis for investment decisions, I know and of course a very sweeping generalisation.) I think you should review brands and product refresh. Let's say Maserati for example and what they are doing with it, or Jeep... etc... Link to comment Share on other sites More sharing options...
rogermunibond Posted January 9, 2014 Share Posted January 9, 2014 http://www.ft.com/intl/cms/s/0/e42a07f8-779e-11e3-807e-00144feabdc0.html Interesting take in the FT on Sergio and Fiat. Link to comment Share on other sites More sharing options...
racemize Posted January 9, 2014 Share Posted January 9, 2014 http://www.ft.com/intl/cms/s/0/e42a07f8-779e-11e3-807e-00144feabdc0.html Interesting take in the FT on Sergio and Fiat. any summary for the lowly non-subscribers? Link to comment Share on other sites More sharing options...
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