New investments in Italian entrepreneurship, intense advisory activity, stable assets with a quality, low-risk portfolio, total liquidity of 120-130 million. These are the strengths of Tip, chaired by Giovanni Tamburi, according to the opinion of Antonio Tognoli of Integrae Sim who in a report confirms his buy of the company with a target price of 2,1 euros per share (the market price is around 1,45). And he explains: “We believe that an investment in TIP can be assimilated to that of a total return fund with the advantage of being able to have an extra yield, deriving from possible capital gains on unlisted companies”.
WHERE TO INVEST TIP
In the first ten months of 2011 Tip invested around 30 million euro. Among the most important investments: 6,2% of Prysmian (through ClubTre), Ima, Diasorin, and De' Longhi. Furthermore, it doubled its investment in Noemalife (to 5,85% from 2.8% of the capital) and slightly increased its stake in Bolzoni. Through the financial Dafe 4000 SpA, it then acquired a share of the Intercos group.
STABLE AND QUALITY HERITAGE
Between January and September 2011, shareholders' equity withstood the storm on the markets and remained essentially stable at 181 million euros (186 in Tip spa's financial statements as at 31 December 2010). A stability that in this market context is proof of a quality investment portfolio. On the markets Tip has invested, among others, in world leading companies in their sector that are able to reduce the volatility of the portfolio. These are Amplifon, Datalogic, Interpump, Zignago Vetro, in addition to the aforementioned Bolzoni, Ima, Prysmian, Intercos and De' Longhi. The result is that the average volatility of Tip's portfolio over the last three months was about a quarter of that of the market. “Among the unlisted companies – notes Tognoli – we underline the concrete possibility of realizing important capital gains: from the 14.8% stake in Borletti/Printemps Group Finance SCA (we estimate 25 million euros); from the NH operation (after 370 million euros made in the third quarter of 2011), thanks to the agreement between NH and the Chinese group HNA; the Intercos group”.
FIREPOWER IS NOT ONLY CASH
The total liquidity available for investments is 120-130 million euros: 24,7 million euros in cash, 60 million euros in the commitment of the current shareholders for the subscription of shares and bonds, 20 million euros as credit and 20-25 million deriving from the conversion of the warrants by 2013. This value, specifies Tognoli, actually underestimates "Tip's real firepower linked to the ability to structure club deals and, through these, draw on financial leverage" .
THE ADVISORY BENEFITS FROM THE NETWORK OF RELATIONSHIPS
Thanks to TIP's managerial consultancy support and network of relationships, numerous companies in its portfolio carried out extraordinary operations (ie Valsoia, Datalogic, Bolzoni) in the last quarter of the year. Transactions that made it possible to generate significant revenues even in a negative M&A market during 2011. In the first nine months, on the other hand, the advisory activity was considerable but the related economic results "were not commensurate with the work performed due to the difficulties due to the different expectations of buyers and sellers".
TIP'S VALUE CHAIN GENERATES MORE VALUE THAN COMPETITORS
The numerous M&A transactions carried out by the companies in the portfolio in a difficult context for M&A are proof of a substantial acyclic nature of the business model, strengthened by a skilful mix of shareholders, management skills and entrepreneurial network. ”In other words – explains Tognoli – Tip's value chain is able to generate greater value than its competitors, even in negative economic phases. Greater value from which its shareholders benefit. Since the listing they have received back a total of around 30 million euros (22 million in dividends, 8 in buybacks and free capital increases). “We calculated an IRR of 3.9% (8.6% in the last 12 months)” says Tognoli who explains on the target price assigned: “In order to include the value of the “intangibles assets” (the network of shareholders, the international advisory network, management skills etc.), we applied a 15% premium to the equity value (of 1,83), reaching €2.1 per share. Regarding listed holdings, we highlight the low volatility (risk) of the portfolio relative to the market. In other words, we believe that an investment in TIP can be assimilated to that of a total return fund, with the advantage of being able to have an extra yield, deriving from possible capital gains on unlisted companies, with an extra - decidedly lower risk than the return offered not only by similar assets with the same degree of risk but, as we have seen over the last few months, also by risk-free securities, thanks also to the excellent mix of intangible assets highlighted above”.
