Italian Net Net: Vianini Industria
(09/06/2012)
Usually, when someone is looking for Nets Nets he
turns his view to the land of the rising sun: Japan. However, the European
economic crisis caused a huge decrease in European markets, especially in the
shares of companies quoted in the peripheral countries, such as Italy, Spain,
Greece, Portugal etc. These circumstances create big opportunities in the stock
market and some big mispricing in the shares of some firms. Therefore some Net
Net situations have surged in recent months. The first Net Net I am going to
talk about is Vianini Industria, an Italian firm quoted in the Italian stock
market. Vianini is not a good business, it produces cement structures like
pipes, piers, cement structures for railroads and aqueducts, etc. The firm is
not that profitable, it is not a good business, it is not in a good sector and
it is part of a group called Caltagirone SPA, a group with more than 5.000
employees, 1,5 billions in revenue and it is owned by Francesco Caltagirone
(54%). Mr Caltagirone is an Italian entrepreneur who, in 2011, was condemned to
3 years in jail for insider trading and has other problems with the law, so we
cannot be shure of the integrity of managers and owners and probably this fact
is discounted in the market price. Vianini has a Market Cap of 33,5 millions
and an EV of -21,8 millions. The firm is not profitable and it is probably
worth more dead than alive. This is the reason why I am going speak about the
assets of this firm. The interesting thing is that Vianini has 31,8 millions in
cash and this means that 95% of market cap is made of cash and has total
liabilities of 9,9 millions. Moreover, besides cash, Vianini has 25 millions €
(31/12/2011) of available for sale securities: 21 millions € in shares of
Generali (Insurance company) and 4 millions in Cementir (Cement producer), both
companies are quoted in the Italian stock market. Today (09/06/2012) these
shares are worth 20 millions and if we add them to the cash figure we come up
with 52 millions against a market cap of 33,5 millions. Here are the Net Net
calculations (I want to thank Oddball stocks blog for the format of this
spreadsheet):
Input
|
Per
Share
|
Multiple
|
Discounted
Value
|
Pert Share
|
|
Cash & Equivalents
|
31.842,00
|
1,06
|
100,00%
|
31.842,00
|
1,06
|
Restricted Cash
|
-
|
100,00%
|
-
|
-
|
|
Marketable Securities
|
-
|
100,00%
|
-
|
-
|
|
Cash Total
|
31.842,00
|
1,06
|
100,00%
|
31.842,00
|
1,06
|
Accounts Receivable
|
4.706,00
|
0,16
|
75,00%
|
3.529,50
|
0,12
|
Other current asstes
|
24.607,00
|
0,82
|
75,00%
|
18.455,25
|
0,61
|
Receivables
|
29.313,00
|
0,97
|
75,00%
|
21.984,75
|
0,73
|
Inventories Total
|
8.392,00
|
0,28
|
50,00%
|
4.196,00
|
0,14
|
Total Liabilities
|
9.876,00
|
0,33
|
100,00%
|
9.876,00
|
0,33
|
Property, Plant, and Equipment
|
7.088,00
|
0,24
|
10,00%
|
708,80
|
0,02
|
Shares Outstanding
|
30.105,00
|
||||
Net Current Asset Value
|
59.671,00
|
1,98
|
48.146,75
|
1,60
|
|
NCAV + Fixed Assets (PP&E)
|
66.759,00
|
2,22
|
48.855,55
|
1,62
|
|
Net Cash
|
21.966,00
|
0,73
|
|||
Price Per Share
|
1,11
|
||||
NCAV + Fixed Assets (PP&E)
|
1,62
|
||||
Price / NCAV + Fixed Assets (PP&E)
|
68,40%
|
The adjusted Net Current Asset Value is 1,60 per share
against a market price per share of 1,11. If we add adjusted PP&E we come
up with a value of 1,62 per share. Therefore, the market price has 68,4%
discount against the NCAV. In this calculation I put 24,6 millions of other
current assets that are something like loans to other controlled parties. Maybe
these assets are not that “shure” and recoverable, but we must remember that
among the assets (non current) there are also 20 millions of available for sale
securities, therefore I think that the firm, from the balance sheet point of
view is undervalued. Stated book value per share is 3,24 (31/12/2011), however
PP&E is almost fully depreciated and the original cost has been 60 millions
so probably its value is more than the net book value and the firm says that it
has 48 millions of PP&E (cost) that has been fully depreciated and it
doesn’t appear in the balance sheet, but some of this PP&E should have some
value in case of a liquidation. Therefore, in a supposed liquidation the firm
is more valuable than what the price of its shares show at the moment. Below we
calculate the Net Current Asset Value including marketable securities and
writing down intercompany loans by 50%:
Input
|
Per Share
|
Multiple
|
Discounted Value
|
Pert Share
|
|
Cash &
Equivalents
|
31.842,00
|
1,06
|
100,00%
|
31.842,00
|
1,06
|
Restricted
Cash
|
-
|
100,00%
|
-
|
-
|
|
Marketable
Securities
|
20.117,76
|
0,67
|
100,00%
|
20.117,76
|
0,67
|
Cash Total
|
51.959,76
|
1,73
|
100,00%
|
51.959,76
|
1,73
|
Accounts
Receivable
|
4.706,00
|
0,16
|
75,00%
|
3.529,50
|
0,12
|
Other
current asstes
|
24.607,00
|
0,82
|
50,00%
|
12.303,50
|
0,41
|
Receivables
|
29.313,00
|
0,97
|
75,00%
|
15.833,00
|
0,53
|
Inventories
Total
|
8.392,00
|
0,28
|
50,00%
|
4.196,00
|
0,14
|
Total
Liabilities
|
9.876,00
|
0,33
|
100,00%
|
9.876,00
|
0,33
|
Property,
Plant, and Equipment
|
7.088,00
|
0,24
|
10,00%
|
708,80
|
0,02
|
Shares
Outstanding
|
30.105,00
|
2,89
|
2,09
|
||
Net
Current Asset Value
|
79.788,76
|
2,65
|
62.112,76
|
2,06
|
|
NCAV +
Fixed Assets (PP&E)
|
86.876,76
|
2,89
|
62.821,56
|
2,09
|
|
Net Cash
|
42.083,76
|
1,40
|
|||
Price Per
Share
|
1,11
|
||||
NCAV +
Fixed Assets (PP&E)
|
2,09
|
||||
Price /
NCAV + Fixed Assets (PP&E)
|
53,19%
|
Adding 20 millions in marketable securities and
writing down 50% of intercompany loans I come up with a value of 2,09 including
10% of Net PP&E and not including the 48 millions that have been written
down to zero and do not appear on the balance sheet. The original cost of
PP&E on the balance sheet is 108 millions and I give to it a value of less
than 1 million so I am really conservative in the asset calculation.
Conclusion
Vianini Industria is not a good business and it is not
a profitable one but from the balance sheet point of view it is deeply
undervalued. The problem that I see is that there is no clear catalyst that can
disclose the hidden value. The firm is part of a holding company owned by
Francesco Caltagirone and even if it is more valuable dead than alive, I do not
think that the CEO is willing to liquidate it or try to disclose some value in
any other way. However the discount to the NCAV is so big that it could be a
good investment with not many downside risks and a good upside potential.
Disclosure: I do not hold a position in any issue
mentioned in this post.
No comments:
Post a Comment