sorry last thing...if you look at the M&A in the space between PTRY, CAPL, LPG, SUSS, Hess, etc, they were all done at significantly higher multiples. Some of the discount has to do with RMR / HPT thwarting any takeover possibility but I don't think that's warranted. If someone came to the table with the right price they would listen. If not and TA has to stand on its own then this is easily the best operating environment it has ever had as a public company.
I mean I get the concern and I think people have become accustomed to trading this stock in ranges, but this has broken out above its long term ceiling of $12.50 on significant fundamental reasons. The tailwind they are now getting theoretically could last for years. Oil stayed low for all of the 90's essentially. If that happens this decade TA could do extremely well.
Impossible to figure out the short term direction; however, it is trading at about 13 times EPS for the past few years and that was when oil was significantly higher and when they had a smaller footprint. They're expanding fairly aggressively. Can they do $2 EPS within the next 2 years and trade at 13 x or $26? Sure, why not?
TA is in the wheelhouse of lower oil. It's the number one beneficiary, operating 500+ quick service and full service restaurants and having higher fuel margins. Plus the economy is doing fine which means more traveling / trucking business.
Gotta wonder if HPT / Portnoys would look to monetize TA. This space is red hot right now. Valuation on TA is still really low at 11X EPS, 5X FCF run rate from last quarter, and 3X EBITDA run rate from past 2 quarters. Those are all exceedingly below competitors.
close but not quite. Works out to 193MM to 227MM based on convert ratio of 7.7369 to 9.0909. Exor (largest shareholder) is taking up $886 MM worth or about 97M to 115M of those. That leaves 100 to 130 (depending on convert ratio). Those shares are likely being shorted against by convertible holders to wipe away equity risk.
There has been about 142 million shares traded the past 2 days so that may account for the majority of those trades.
I could envision them doing $5 Billion in net profit, trading at a 8p/e and Ferrari being worth $10 Billion some time in 2016. Combined that's $50 Billion total equity vs $15 or so today.
so it gets back to the same thing i mentioned before. a $4-$5 Billion remaining equity value for a company that will do $120 Billion in sales and maybe $4 to $6 Billion in profit in a couple years (again, Chrysler alone is expecting $2.5 Billion in net profit in 2014). I'd say there's considerable upside here.
Just do a google search of Ferrari Sales 2013 and the first link shows you what results were for 2013. 2014 they should do $370 Million or so in net profit. With the increase in production over time I think its reasonable to expect $500 Million in net profit. Using a 20 p/e a $10 Billion valuation isn't out of the realm of possibilities given how exclusive the brand is and the potential to grow over time through licensing / etc.
Last year Ferrari did about $350 Million in net income. This year their production was up about 5% so I'd expect NI to be somewhere in the $370 range or so. With talk of growing production about 40 to 50% in the next few years, coupled with it being one of the world's most premium brands, I think it wouldn't be outlandish to expect a $10-12 Billion valuation, or about 20-25X 2016 NI. On the low side I think a $7 to $8 Billion valuation is reasonable. Either way, you're talking about a remaining equity value of $2 to $7 Billion for a company with the potential to generate $4-6 Billion in Net Income within 3 years and doing $120 Billion+ in revenues. Chrysler alone will do $2.5 Billion in Net Income this year.
I'm interested in seeing what they discuss as far as growth strategy...whether or not its rolling out more Ferrari Worlds like the one in Abu Dhabi or if they plan on pushing more licensing stuff for kids toys like Caterpillar has done so well over the years or something else.
FCAU should be able to continue paring down debt via convertibles and/or free cash flow which will reduce interest expense and increase EPS. Additionally, Fiat should benefit from a gradually improving Italian/European economy which will reduce the drag from that unit. All in all, I think the upside potential is pretty promising here and the downside buffer from the Ferrari IPO creates a nice risk-reward setup. The automakers in general are pretty hated right now so the whole sector is cheap.
Ferrari did about $350 Million in net income. This year their production was up about 5% so I'd expect NI to be somewhere in the $370 range or so. With talk of growing production about 40 to 50% in the next few years, coupled with it being one of the world's most premium brands, I think it wouldn't be outlandish to expect a $10-12 Billion valuation, or about 20-25X 2016 NI.
We'll see though. I'm interested in reading about their growth strategy in the S-1 papers when they come out.
On the low side I think a $7 to $8 Billion valuation is reasonable. Either way, you're talking about a remaining equity value of $2 to $7 Billion for a company with the potential to generate $4-6 Billion in Net Income (Chrysler will do $2.5 Billion this year) within 3 years and doing $120 Billion+ in revenues.