FIAT, CONVERTENDO BETTER THAN THE INCREASE BUT FOR ANALYSTS, THE INDUSTRIAL PLAN MATTERS
Capital increase no, converting yes. In the interview granted to Repubblica, Sergio Marchionne dissolves, if ever there is a need, the doubts about the group's next financial strategies: the capital increase, he says, “would be a destruction of value. There are different and innovative models for financing investments”. Among these, "the convertible could be a suitable measure" for at least two reasons: a) "we need money to finance the restart"; b) the convertible could guarantee these funds without causing the downgrade of Moody's due to excessive debt. "But I remember - replies the CEO of Fiat and Chrylser from a distance - that in 2007, before that brothel broke out on the markets, we reached zero debt".
Marchionne's recipe, judging by the analysts' reaction, is popular. The Banca Akros team (buy and target price at 7,50 euros) appreciates that Marchionne has defined the capital increase as a destructive operation in terms of value. On the contrary, the game is played on the success of the industrial plan of April. “Our reading – is the comment – is that Fiat will present a plan that will also focus on strong cash generation. For this reason we believe that the interview could have a positive impact on the share price on the stock exchange”.
Equita (buy and target price of 7,9 euro confirmed on the stock) deems a 1,5 billion euro convertible to be "reasonable". Of course, the term convertand evokes the memory of one of the darkest seasons of the Lingotto when the transfer of control to the pool of lending banks seemed probable, indeed taken for granted ("when they came to Linotto they only needed to take the measurements of the chairs" joked Marchionne ). But today the picture is radically different. Banca Imi analysts consider the convertible bond loan a "reasonable and effective means of strengthening the group's financial structure". For the shareholder, the potential dilution, in any case in the single digit range, could be offset by an exercise price of the convertible bond at a premium compared to the current share prices on the stock market and by the reduction in financial charges weighing on Fiat.
The opinion of Intermonte is similar: the convertible (1-2 billion which could materialize as early as this quarter) will have limited dilutive effects: "We confirm the outperform recommendation and the target price of 7,50 euro per share". In summary, the financial road map is convincing. As well as the decision to speed up the company discontinuity (“the new company will have a new name”) and the decision to focus on markets “where access to capital is easier”. New York better than Milan but, if necessary, "you can also go to Hong Kong to finance the Fiat-Chrysler effort".
Reading the various reports that comment on the words of the Italian-Canadian CEO, it emerges that never before has the industrial bet rewarded speculative valuations. According to the Financial Times, Marchionne has once again confirmed himself as the king of dealmakers, one that it is not wise to challenge in poker. But will he be able to establish himself as an auto industrialist like the various Carlos Ghosn or Martin Winterkorn? Will Lingotto make it to qualify as a premium brand?
Equita does not forget that the relaunch of Alfa Romeo has so far been an eternal promise (April will be the fourth relaunch plan since the beginning of the Marchionne era) and that, moreover, we are starting almost from scratch (only two models , MiTo and Giulietta, less than 100 units sold in 2013). But the Equita team nonetheless believes that with the launch of new models and the exploitation of Chrysler's distribution network, profitability (today in heavy losses at an operating level, even if there is no confirmation of an official figure) can only improve.
However, "Marchionne's indications are positive and confirm the strong commitment to relaunch the group on the premium front by leveraging the production base in Europe and the distribution network in North America", comment the analysts of Intermonte. Therefore, this is Banca Imi's reasoning: "We continue to recommend the purchase of Fiat stock pending the group's industrial plan in April from which we expect a more detailed flow of news on further synergies with Chrysler, not yet included in our target price at 7,20 euros”. In this regard, "news on possible future partnerships with Asian players would also be welcome to better saturate the production capacity of the Italian factories".
