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Natuzzi SpA Message Board

  • longtimefollower longtimefollower May 30, 2013 8:00 PM Flag

    The case for NTZ.

    Here is my case for it:

    At a $2.08 price:

    1) Selling for less than 1/3 of tangible book value and 77% of net current assets.
    2) Gross cash per share is $1.74. Net cash is 70 cents.
    3) The CEO owns 60% of the stock, and has been buying stock in open market. (Obviously, a controlled company has its drawbacks, also.)
    4) Company owns virtually all its real estate outright. Founded in 1959, probably has undervalued real estate.
    5) NYSE listed. Italian based, with global operations.
    6) Company discusses, in Tuesday's earnings conference call, the restructuring of production methodology, going from "island based" furniture assembly method, to production line. Said in the call that productivity will increase 25-30%, and defect rate will decrease from 5% to 1%. This will take 18 months to put in place.
    7) Management has high integrity, and is exceptionally honest. (You can hear that in the conference call.)
    8) I believe the brand has exceptional value, not reflected in the stock price. (Per the 20-F, NTZ's global luxury brand identification is the highest amongst furniture companies, and the SECOND HIGHEST, globally, amongst ALL luxury goods providers.)
    9) Company could be taken private. CEO could use the cash on the balance sheet, easily, to buyout the minority holders at $4 a share, and the company would still only have 15% debt/equity! (Also, I personally believe that if the Natuzzi family wanted to get out, and they at least returned it to profitability first, it could be sold for around $6.)


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    • 10) CEO said the company only needs to increase sales 10%, to get back to profitability.
      11) This is an excellent play on a global recovery in housing...and the inevitable recovery in the European (and Italian!) economies.
      12) Domestic U.S. furniture stocks (ETH, LZB, AMWD) are up 40-100% since last summer. NTZ is DOWN, even though it does a sizable chunk of its business in the Americas.
      13) Historical net margins, in the early to mid 2000's, were 10-13%. (The company made the equivalent of $2+ in EPS, in that era!) While they probably will never get back to that level, I believe this business can eventually earn at least $1 in EPS, which makes the stock very cheap on future P/E, and price/sales (backing out the cash per share).
      14) Stock's upside, in a better case scenario, is $10-15. I view that is a reasonable 3-5 year target. Meanwhile, I think we can trade up to $3-5, over the next 12-18 months.

      Potential Negatives:

      1) Closely held company may have excessively insular management and board that doesn't "have what it takes" to compete.
      2) Company's "overcapitalization" shows that they are excessively conservative. (They should be buying back stock like crazy, imho.)
      3) Business model could be permanently compromised, by foreign "knockoffs."
      4) Company has lost money every year, since 2007, and probably will lose money in 2013.

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