Sunday, September 17, 2017

The Patent-Box.

The Patent-Box is a facilitated taxation of income arising from a certain types of intangibles assets like know-how, trademarks and patents. It is a way to encourage the investment of the firms in research and development. The beneficiaries are all eligible corporate income taxpayers, regardless of their legal form (corporate enterprises, partnerships, cooperatives, mutual companies, public and private), of their size and accounting regime adopted.

The main requirement is the following : the abovementioned firms need to carry out research and development activities with the aim to product certain intangibles assets (internally or not). The excluded companies are those in liquidation and/or with extraordinary administration, as well as the firms that determine the income with fixed criteria and self-employed people. 

The facilitated taxation regards the use (direct or indirect) of :
  • copyright-protected software ;
  • trademarks (registered or under registration) ;
  • designs and models (legally protected) ;
  • processes, formulas and information (industrial, commercial and scientific field, legally protected).
The facilitation consists in deduction of income related to previous use which does not contribute to the generation of total income by 50% of the relevant ammount (30% for the fiscal year 2015, 40% for the fiscal year 2016 and 50% for the fiscal year 2017). In order to quantify the benefit, it needs to calculate the amount of income arising from the use of intangibles assets. 
  1. With indirect use, the income is equal to the fees resulting from the use of the asset, net of tax-related costs.
  2. With direct use, it is equal to the economic contribution of the asset vs the total income of the company ("Ruling Procedure").
Then, we must also consider the allowable income share, on the basis of the ratio between the cost of reasearch and development activities, relevant of tax purposes (including the maintenance, growth and development of the intangibles assets) and the total costs, relvant of tax purposes, incurred to product such goods. Finally, we can apply the deduction percentages (30%, 40% and 50%). 

The facilitated tax option has a duration of five tax periods. It is irrevocable and renewable.
The option must be transmitted telematicly. The option covers the tax period during which is communicated and the next four. The option is significant in addition for the IRES and IRPEF income and also for the value of IRAP production. 

Lately, in the luxury sector we have had two examples : Tod's and Brunello Cucinelli. 
The benefit is estimated at the time of the earnings release. The regime covers five years (2015-2019).

Patent-Box : Tod's S.p.A.

The same for Brunello Cucinelli : see the following image. 

Patent-Box : Brunello Cucinelli S.p.A.

To read the full press-releases, please consult the following links : 

As we read in the previous documents, we can notice that the impact of the benefit is small. 
Simply, it is a surplus-value linked to fiscal and legal matters. Clearly and primarily, the intention of the legislator is to promote the use of the intangibles assets, without paying much attention to the effective higher income (generable). 

Thursday, September 14, 2017

Enel S.p.A. : chart framework.

Here we have the chart of Enel S.p.A. : the stock broke the resistance at about EUR 4.50 (the previous maximums, yellow circles) and then, it broke the previous top at about EUR 4.90 (red circles). From a lateral trend (between 3.50 and 4.50), the stock began a bullish trend (still in progress) since the beginning of the year 2017. The bullish trend is highlighted with a blue parallel channel. We have another confirmation (also in the medium/long period) with the dashed line that is still valid. We can say that there is a clear bullish trend and unless conditions change, it will be confirmed : only with a break of the previous top (red circle) but mainly with a break of  the tops at 4.50, there may be a change in the trend and consequently a test of the lateral trend area (abovementioned). The change of the trend must be accompanied with high volumes, other patterns and other confirmations, in the following trading sessions, of course (at present, it is a bullish trend). 

Chart from

The slope of the EMA (60 and 20) shows the uptrend, too. The RSI is not overbought but the values are in the neighborhood of the upper line. The bullish trend is strong but there are not nearly retracements. The uptrend needs a break (at least, in the short term).

Chart from

The FIBO retracements indentify the previous price levels (see the first chart and see the blue circles) of the past resistances. It is very important to focus on those to set a short or long trading strategy, even if the trend is bullish, clearly. 

Chart from

Analyzing the short-term, we can see that the BB show an high volatility, just after absorbed, with a candlesticks pattern, a Dark Cloud Cover. After a bullish trend, it is a bearish reversal signal. At now, it represents only a "volatility exhaust" and a price correction in the short-term.
See the chart and the following pattern recognition.

Chart from

A Dark Cloud Cover consists of two candles (white and black) : the black one has the opening price higher than the top of the white one and the closing price lower than the median value of the real body of the white one. As usual, we need a confirmation (a bearish candle after the black candle and a continuation in the trend change). The top of the black candle represents a resistance. 

Sunday, September 3, 2017

Brunello Cucinelli S.p.A. : comments with regard to the 1rst half 2017 results.

We have a double-digit growth in both revenues and in profit. The perfomance is better in the international markets than in domestic market. However, overall, the results are good. 
Net sales benefit from the forex : at current exchange rates, net sales rose by 10.7% ; at costant exchange rates, net sales rose by 9.7%. 
The brand has a great perception among the customers and among the different distribution channels ("digital" and "physical"; retail, wholesale multibrand and wholesale monobrand).
About the net financial position, we have a decrease due to the good cash generation from operating activities (+26,519 vs +4,339) and due to the positive changes of the net working capital (for further info consult the consolidated statements of cash flows).
It was used cash flow in investing activities (-22,749 vs -16,849) to support the brand, to safeguard its prestige and its exclusivity.

The following table shows the income statement data : there is an improvement of the items (double-digit growth, like I said previously) and, at the same time, an amelioration in the margins. 

The management explains that this good policy will be proposed also in the future, thanks to the investment plan 2017-2019. To read the full press release, please see the link (Brunello Cucinelli investor relations) :

At the release of the data, the market reaction was good : the volumes increased and there was a white candle. However, just after, the candles presented some shadows (Doji Star Bearish pattern). 
It means a weakness in the bullish wave, a resistance in the maximums and a pressure from the sellers. The BB shows an high volatility that may be absorbed, subsequently. See the chart.

Chart from

The stock is not at all cheap. 
If we project the growth of the first half of the year, applied to the full year 2016, we get :

Full Year 2017 Revenues  = 457,029 * (1 + 10.97%) = 507,165.1
Full Year 2017 Net Income = 37,119 * (1 + 23.88%) = 45,983.02

If we project the margin of the first half of the year, we get :

Full Year 2017 Net Income = 507,165.1 * 8.12% = 41,181.8

At the current prices, we have a market cap of  1,731 EUR M. It means about 40X the expected earnings and about 3.40X the expected revenues.
There is a premium compared to the peers (considered also the smaller size of the firm). 
This premium can be explained by : 
  • The high brand perception ;
  • The rarity and the craftsmanship of the product ;
  • The quality of the management and of the business ;
  • M&A opportunity, having regard to the small size ;
  • The higher defensiveness of the stock (low beta 0.29, Brunello Cucinelli overview from, vs the industry average). On the long run, it is a safety for the price stability. 

Tuesday, August 22, 2017

Event-study strategy.

An event-study is a statistic method applied to the financial markets that has the purpose to measure the relevance/irrelevance of an event on the stock prices ; in other words, we value if an event is or is not price-sensitive, "over the normal returns", calculated by a market model through the following regression : 

R(stock) = α + β*R(benchmark)

R are the returns, expressed as a percentage, respectively of a single bond (the subject of the analysis) and of the benchmark (a market index).

α is the intercept.

β is the slope. 

An Event-study strategy has the aim to :
  • value the relevance of an event (like the earnings releases, like a particular press release, like a macro-event and so on) ;
  • value the impact and the statistical significance of the event ;
  • measure the market moves of the insiders and the market mood, at the time of the event ;
  • by combining the previous aspects, it means to make profitable a trade just buying or just selling the stocks (it depends on the specific situation) a moment before the event (some days, a week or a month before).  
The success of the strategy is not absolute but it is very true as the event is significative and repeatable. As known, the market is unpredictable and facing the same news, we could have a different market reaction. 

The following case shows the strategy. We speak about the full year 2016 results of Moncler S.p.A. The press release is dated 28, February 2017.

As the theory says, it needs to create a "window" in three parts :
  1. Estimation window, useful to build the regression (usually, it is a period of 252 days) ;
  2. Event window, the window of the event (it is a period of 6 days, 2 days before the event, the day of the event, and 3 days after the event, to cover any delays or news leaks) ; 
  3. Post-event window, useful to value the impact of the event in the following days.
In this way, we can build the regression : we take the historical returns of the stock (Moncler, Y) and of the market index (FTSE-mib, X). The regression is shown in the following image. 

The parameters of the regression are the following (see the table).

For the returns (change %), I used the historical data from and I put them on a spreadsheet. 

The estimation window is the period from March 3, 2016 to February 23, 2017 (in the image, there are some hidden cells, for space requirements).
The event window is the period from February 24, 2017 to March 3, 2017. 
The post-event window is the period from March 6, 2017 to March 31, 2017.

With the regression, we measure the abnormal returns (AR). 
The formula of the abnormal returns is :

(Effective return of the stock - Estimated return from the market model).

The estimated return is equal to [α + β*(effective return of the market index)].

The AR test t is : AR / STD.ERR.(YX).

To understand if the AR is significative and so if the event is price-sensitive, it needs to measure the statistic significance of the AR : is the absolute value of the AR test t is greater (YES) or less (NO) than 1.96 ? 

Abnormal returns (AR) in the event window

We can conclude that the earnings release impacted positively on the stock prices and that the event was significative. Just buying before the event, betting on the publication of good data, it would have been profitable. The following image shows the candlesticks chart of the event. 

Chart from

As I previously said, the good success is basically based on the repetition of the event and the importance of the event itself. It means also that there is the same market reaction in every occasion (it is not so obvious). 

With Moncler, there are many aspects that confirm this, see the following link :

Tuesday, August 15, 2017

Moncler S.p.A. : cash flow statement analysis.

Here we have the consolidated cash flow statement of Moncler (full year 2016 results). 
For further info, we can consult the following link (investor relations) :

Consolidated cash flow statement

I will produce a detailed analysis of the cash flow statement with the aim of understanding if : 
  1. The firm has a great financial balance ;
  2. The core business is able to support the other areas (as it should normally be), investing and financing activities. 
At a glance, we can notice that the core business (operating activities) generates cash flow (+383,664). It is very important for a functioning business. If a firm absorbes cash flow from operating activities, it is not vey good. Substantially, it is a poor business. 
However, the investing activities and financial activities absorbe cash flow. A functioning firm should invest to grow (like Moncler with a negative cash flow from investing area > purchase of tangibles and intangibles fixed assets > -63,301). The financing area should generate cash flow (positive cash flow), to support the business and to grow, following the foregoing reasoning. Instead, the firm prefers repaying the debts (repayment of borrowings, -68,592). 

To summarise, the cash flow from operating activities should be positive and able to cover the financial needs from the other business areas. We are in a great situation with a positive cash flow from the core business and big enough to offset the cash outflows from the other activities. 
We are in a bad situation with negative cash flow from the operating activities and the other areas are not able to generate adequate cash flow to cover the cash outflows from the other business areas. 

The following table and the following  pie chart is very exhaustive. At the same time, Moncler presents a great financial balance and a core business capable to support the areas that absorb cash flow. Indeed, the total net cash flow is positive (a+b+c) and the percentage of the cash flow from operating activities compared to the percentages of the other areas is greater than 50%. There is also an improvement if we look at the fiscal year 2015 and at the fiscal year 2016 : from 54% to 61%.

Table of the cash flows and compared pie charts

To conclude, it is useful to calculate two ratios : revenues monetization index (also known as monetary ROS) ; EBIT liquidity index. The formulas are the following. 

Monetary ROS : Cash flow from operating activities / Revenues.

EBIT liquidity index : Cash flow from operating activities / EBIT.

The following chart shows the compared analysis. For the EBIT, I used the EBIT adjusted, due to the non-recurring items. 

Cash flow statement ratios

The two ratios are very good, as a percentage. The cash flow from operating activities represents the 27% of the revenues and the 88% of the EBIT. There is also an improvement from the full year 2015 to the full year 2016.

Sunday, July 30, 2017

The volatility.

The volatility is an important parameter in the financial markets. 
It is useful to : 
  • measure the underlying risk of an asset or portfolio (higher the volatility, higher the risk);
  • set the market orders, stop loss, take profit, limit orders and so on (higher the volatility, "wider" the market orders) ;
  • set the trading profile (higher the volatility with pure trader strategy and lower the volatility with pure investor strategy) ;  
  • measure the market mood (higher the volatility with an important event price-sensitive ; "stock market fever", see also the VIX indicator). 
As there are so many purposes, in the same way, there are so many methods of measuring and indentifying it. At first, the classical measure is the deviation standard. To calculate it, it needs to import the historical returns of an asset to an Excel spreadsheet and then applying the following formula :

=  DEV.ST.POP (historical returns).

Historical data from
Here, we have an image that clearly explains the case. The time-period can be daily, weekly, monthly etc, in the analyst's discretion and based on the purpose of the analysis (it means also holding period and investor perspectives). The ticker is APPLE. The time-frame is daily. 

Another measure is that provided by the graph (indicators).  
In this sense, it means respectively : 
  • width of the real bodies and of the shadows (candlesticks chart ; wider the bodies and the shadows, higher the volatility) ;
  • width of the Bollingers Bands (wider the bands, higher the volatility) ;
  • magnitude of the volumes and so market interest (higher the volumes, higher the volatility). 
As shown in the following chart, there is the silmultaneous presence of more detectors (read the notes inside the graph). 

Chart from

Indeed, BBW and HV are useful indicators to measure the volatility. There is a peak compared to the historical series (circled ellipses). The Envelopes (EV) have the same meaning of the BB : if the stock price is above or below the envelopes, there is high volatility in both directions.

Envelopes (EV) ; chart from

To conclude, once measured and identified the volatility, every trader/investor should set his trading strategy accordingly, pursuing own profit and loss targets, of course. 

Saturday, July 29, 2017

IMA S.p.A. : chart framework.

About the chart of IMA, we can notice a strong uptrend that began on October 2014 and it is still valid, from area 25 EUR to area 85 EUR. The great fundamentals of the firm have supported the good stock performance : it means good management and good shareholders remuneration, anti-cyclical business, good (geographical) diversification and uncorrelation from macro-events and italian economy (low beta). 
For further info, visit the official website (section investor-relations).
Of course, we got some breaks but we can consider them as small retracements that didn't damage the bullish trend. As shown in the chart, we have a primary trend with a parallel channel broke in area 70 EUR that brought the stock to the secondary trend with its parallel channel. The uptrend is also confirmed by the overcoming of the resistances (and of the resistance trasformed into the support). 
Chart from
Only with a break of area 85 EUR, it will be a continuation of the uptrend and only with a break of area 70 EUR, it will be a change in the trend : as usual, it needs other confirmations and volumes to more validate the signal. For this purpose, see also the chart with the FIBO levels.

Chart from
With a LOG scale, we can appreciate clearly the chart framework (it is substantially the same as the previous chart). Indeed, the LOG scale is reccomended with long-term analysis and with great price excursions (it suits our case). Otherwise, the LINEAR scale is used for indentifying price levels, focusing on the absolute values and not on the relative values of the prices, like the LOG scale.
Chart from
In other words, the LOG scale smoothes the market excesses. 
To know more about it, consult the following link : 
The slope and the structure of the EMA bundle certify the uptrend, too.

Chart from
Anyway, in my opinion, I would await for the next market movements, in one direction or another : see the following chart. The overcoming of the BB allows only a trading range between area 75 EUR and 85 EUR (in this sense, in the short-term, it lacks a consolidated trend setting, of course). The uptrend is strong and it is almost immaculate, in the long-term.

Chart from

Sunday, June 4, 2017

COVER 50 S.p.A. : a good firm with low visibility.

With regard to the FY 2016 results (consult the link, the business increases.
The profitability is strong (from 12% to 48%, from the net income to the contribution margin). 
The cash is high and the cash generation, too (see the cash flow statement) : we speak about a net financial position of about 11.9 EUR millions. The financial structure is excellent with low dependence on debt ("the company mostly finances itself with equity") and the EBIT interest coverage is very good (aka EBIT/net financial charges). 
However, the growth rates are really tight. The business increases at a rate of  2% / 3%. 
The main weakness is the low visibility explained by :

  1. Low growth rates ;
  2. Low volumes of the stock (COVER 50 is listed on AIM that is notoriously known for those features) ;
  3. Free float 25.77% ( with the significant shareholder Fhold S.p.A. with a share of 74.23% (this factor with the previous point could really represent an obstacle for the market liquidity) ; 
  4. The mono-product (the company specializes in the designing, manufacturing and selling men's as well as women's trousers, under the PT Pantaloni Torino brand name) and  the high dependance on the domestic market (the revenues in italian market are still about 43% of the total revenues). 

To improve the business and the visibility (with positive effect on market prices), they should invest more (with a cash of 12 EUR millions, the growth throught M&A could be an opportunity).  At the same time, the development to the high-potential markets should be greater (in particular, with a product differentiation). The subsidiary PT Corp in USA is an example (
As announced in the last press release, the yield is about 4.4% and the payout is about 71%. I would have preferred a reinvestment of the profits rather than a (good) shareholders remuneration, to finance the growth. In this sense, the higher growth attracts the visibility. 
Indeed, the market multiples could be cheaper compared to the peers (on average, fashion and luxury stocks have excessive valuations, due to the brand perception/visibility and due to the high profitability). 
At the current prices, the multiples of COVER 50 (FY 2016 results) are the following : 
  • P/S = 2.28 
  • EV/EBITDA = 8.12
  • P/E = 18.52
The market probably discounts the lack of the visibility and of the liquidity, the lower size and the lower growth expectations (adjusted market multiples). 

About the chart and with regard to the last performance, we have a renewed interest of the investors : the volumes are increasing and the stock is out of the rectangle (accumulation area) with a stop in area 13.7 EUR. 
See the link and compare it with the current situation (the updated chart is below). 

Chart from

Monday, May 1, 2017

Cement industry : Cementir Holding S.p.A. and the value map.

Here we have a classic value map that relates the market multiple P/S (price to sales) to its intrinsic profitability (EBIT/sales or EBIT margin or ROS) and then the mentioned multiple to the expected growth, from the year 2017 to the year 2019 (data source estimates : 

The expected growth is the CAGR, aka cumulative average growth rate. 
The formula is the following : 

[(expected revenues fiscal year 2019/revenues fiscal year 2016)]^(1/3)-1

It is expressed as a percentage. 

The meaning of the relationships (P/S-ROS and P/S-CAGR) is that higher the multiple (P/S), higher the margin (ROS) and higher the multiple (P/S), higher the expected growth (CAGR) and viceversa. 
Obviously, the market generally rewards the firms with higher profitability and with higher growth, with a major market price. 
The relationships can be shown as a value map, particularly through a regression line. 
We have two equations : 

1) P/S = a + b*ROS

P/S = y ; ROS = x

2) P/S = a + b*CAGR

P/S = y ; CAGR = x

In both cases, the intercept (a) was removed for the reason of the low statistical relevance. 
The RSQ is high (0.9070 and 0.8488), which means the strenght of the model.
Graphically, we can note that the relations are clear, substantially : higher the market multiple, higher the profitability and the expected growth.

The stocks above the regression line (dashed line) are overvalued, the stocks below the regression line are undervalued. In this way, for Cementir Holding, we get a "value gap" that is equal to :

[P/S (effective)-P/S(calculated from the market model)] : [P/S(calculated from
the market model)]

The P/S (effective) is 0.72.
The P/S (calculated from the market model) is equal to (9.10%*12.54).

There are also some "outsiders" (Vulcan Materials, Eagle Materials). The profitability is very high compared to the peers. Indeed, we have a multiple P/S of about 4X.

Likewise, for the relationship P/S-CAGR : see the following chart.

The discount ("value gap") is much greater, 71.94% vs 36.91%. The "growth adjusted market multiple" is preferable to the "multiple adjusted for the profitability".

If we remove the two outsiders from the sample, the statistical models are stronger : RSQ is higher, the relations are more even significative. However, the discounts are lower : 10.36% vs 36.91% and 57.16% vs 71.94%.

Finally, Cementir Holding is cheaper than the peers. Secondly, in my opinion, the stock is much more attractive in the area 3.80-4.80 : we could benefit more so from the discount prices and from a possible graphic retracement (see the chart), event if the current prices and expectations are interesting.

Chart from

Tuesday, April 25, 2017

Geox S.p.A. : the historical correlation with the FTSE-mib is significative.

If we look at the historical chart of Geox (red) compared with the FTSE-mib (blue), we can notice that the similitude  is clear : some exceptions apart (like the section of the circled graph, yellow ellipse), the direction of the two assets is substantially the same. To make the comparison more effective, the chart is divided into vertical lines that represent the date ranges with equal period (150 bars) : the most important thing is to value the same direction of the two graphs, inside the date range, in order to have the correlation ; otherwise, the two assets would be unrelated.
In this way, the last performance of Geox is driven by the trend of the FTSE-mib, most likely. 
Indeed, the positive newsflow is absent and the fundamentals are weak (see the last news) : they don't justify all this ; the perfomance is related to the macro context. 

Chart from

The statistical analysis confirms that, too. With sixty returns (monthly time frame, from 2012 to 2017, five years), we can build the regression analysis. 

Historical data from

The results show a beta of about 0.93 in the classic market model, as the following equation : 

GEOX (y) = a + beta*FTSE-mib (x)

If the beta is 1, it is how to hold the index ; if we have lower values, the asset (GEOX) dampens the index movements ; otherwise, with higher values, the stock amplifies the FTSE-mib movements ("leverage effect"). The correlation with the FTSE is evident. We have two outputs for the reason that in the first result, the intercept (a) is sparely significant (see the Stat t or the significance value). We discarded that and finally, we got an equation in the following form :

GEOX (y) = beta*FTSE-mib (x)

RSQ (0.3098) could be low ; it says that 30.98% of the Geox returns (variability) is explained by FTSE-mib returns. However, the CAPM literature shows that for the stocks, on average, the percentage is equal to 30-40% ; for the rest, specific factors affect stock performance. 

At the same time, we have the scatterplot (see the following chart). 

To conclude, another statistical indicator is the Pearson correlation coefficient : with the previous returns (see the second table), we got a value of 0.55 ; it means that there is a positive correlation between the two assets, Geox and FTSE-mib. Secondly, if we analyze the signs of the returns, we can see that in 65% of cases (39/60) the sign is the same (+,+ or -,-) and in 35% of cases (21/60) the sign is different (+,- or -,+). The relation is positive and significative.  

Saturday, March 4, 2017

Geox S.p.A. : the FY 2016 results undermine the ongoing turnaround.

The FY 2016 results are under the expectations of the analysts' estimates and of the targets of the business plan. The revenues grow by 3% (vs the CAGR of the BP, about +6.5% or +5.5% with the lower range of the guidance). Of course, the margins are really under pressure : the gross profit decreases, the same both for the EBIT and for the net income. The results should be considered net of extraordinary items. However, the business is not proceeding well and the cost savings policy is not giving the desired results.
We have an increase of four percentage points, with regard to the cost of sales margin (from 48% to 52%). Overall, there is a great margins erosion. About the expectations, they were estimated stable or slighty higher compared to the FY 2015 results. 
See the link to read about the related press release and compare it with the consensus
On many fronts, they are disappointing, more so after the good trend of the 9 months 2016 (appreciated by the market at the time of the release) and a fortiori with the good progress of the triennium 2013-2014-2015 (appreciated by the market with an excellent stock market performance from 2 to 4 eur/share). 
In my opinion, the management's credibility is in doubt for the above reasons. The market is discounting it. Secondly, in particular :

1) They failed the previous business plan ;

2) With insight, the change of the CEO is probably regarded as a rupture ; I would have appreciated more if the management had much clarified about that. Instead, substantially, they only confirmed what it was said before, in the press release ; 
3) The results are now under the targets of the current business plan ; 
4) The 2016 was supposed to be a transitional year but the results marked a strong deterioration ;
5) The loss of the profitability in the first half of the year 2016 had to be compensated along the second half of the year but we have a clear decline of the margins. 

Press release, first half 2016 results
Press release, 9M 2016 sales
They should work well over the next two years of the plan, to regain credibility, also focusing on the new CEO and on the new markets, like China. The small margins are the great problem ; they must work in that direction (improvement of the margins). Otherwise, the market will probably dislike with a bad price performance ; the decrease of the stock is the evidence, after the earnings release  (the negative impact was partially offset by the good performance of the FTSE-mib ; Geox, beta of about 0.80/0.90). 

Chart from

Sunday, February 26, 2017

The local banks : Banca Popolare di Sondrio and Credito Valtellinese.

Throughout history, CVAL and BPSO have been the subject of more comparisons because of geographical proximity, the similarity of the business and other aspects.
However, in my opinion, in the M&A sector, the most important thing is to create adding value and synergies. If you match together two equal businesses, you don't generate synergies. 
The result of the merger is only the same firm but greater : that is not a complementary business but a substitute. Of course, the common aspects can be used for a major geographical control and for the lower competition, in this way. Nevertheless, in the long-run, you need to grow/to acquire new markets and customer segments, you need to implement new services. By focusing only on geographical matter and/or on the classical commercial bank, you will not reach those goals, most likely. 
Nowadays, the market is changing, costantly. We must be able to meet the challenges and we have to be more flexible : the banking sector (like the past) is dead ; the new banking sector is integrated, inevitably. 

About the latest news, the hypotheses seem to be oriented more to BPER and UNIPOL, after the press relase
Because of the above reasons, I would consider these options more positively. 

M&A apart, it is interesting to compare the numbers (FY 2016). For further info, see the links :

The direct (+4.76%) and indirect (+0.61%) funding grows where for CVAL, we have a decrease, -2.7% and -4%, compared to the same period. The same, with regard to loans and receivables with customers (-8.5% vs +5.49%).

The capital ratios are equal, substantially : CVAL, CET1 11.8% vs 11.09% (BPSO) and Total Capital Ratio 13% vs 13.58% (BPSO).

About the organisational data, there is an improvement for Banca Popolare di Sondrio : 128 new hires and 5 new branches. Credito Valtellinese got worse : number of employees (-1.65%) and number of branches (-4.37%). 

With regard to the credit risk, the credit quality of BPSO is better, of course. The following table shows the comparison.

BPSO has far fewer NPLs and it has higher coverage. The coverage ratio expresses a prudent policy of the bank and a lower potential risk, the higher the coefficient. The cost of the policy is better than CVAL.

Finally, about other financial information, the cost to income ratio shows the better operating efficiency of BPSO, 55.31% vs 69.7% (CVAL). Speaking about the income margins, for both, there is a drop in margins, thanks also to an unfavorable macroeconomic context. However, for BPSO, the decrease is balanced by a cost savings, like administrative (+2.53%) and personnel expenses (+0.44%) vs CVAL, +4.22% and +17.34%. Secondly, there are minor net adjustments for BPSO.

Overall, clearly, at the end of the comparison, BPSO is the favorite. On the other hand, we should not forget the M&A factor that could change the scenario (market price and business) for CVAL, positively.
In fact, CVAL is well set to grow by external lines (like announced) while BPSO seems to continue through the autonomous growth. 

Sunday, February 19, 2017

Cementir Holding S.p.A. : the new acquisitions boost the business.

The last uptrend of the stock is due primarily to the preliminary consolidated results at 31 December 2016 : results over the expectations of the analysts. The good results are related to the new acquisitions of Sacci and Compagnie des Ciments Belges that worsened the net financial debt.
On like-to-like basis, the results would have been stable or decreasing. 

Cementir Holding, Investor Relations, Press Releases

From this point of view, the growth through acquisitions is a focus for the business.
According to me, it will be the likely growth engine for the coming years.
History is there to prove it. The strategy is always the same : organic and external growth thanks to the numerous acquisitions over the years, with a low dependence on the domestic market (about 10% of the revenues). See the image below.

Cementir Holding, Group Profile
The outlook is substantially conservative, EBITDA of around 215 EUR million. The business is still suffering unfavorable FX and geopolitical troubles (Turkey). However, the management is well set to make the difference with a cost saving policy and with the strong implementation of the integration just closed (Sacci and CCB).

Cementir Holding, Investor Relations, Press Releases

About the fundamentals, the price is pretty interesting although the expectations could be flat/conservative (mainly, about the margins). With the 2017 expected results : P/S 0.65 X ; EV/SALES 1.07 X ; EV/EBITDA 6.20 X ; P/E 12 X ; P/B 0.7 X.

Reuters Consensus
About the chart, the downtrend from 7 EUR/share is over. For some time today there is a lateral trend but the last performance with volumes is a good signal that could invalidate the trading range (3.30-5.05). It needs a continuation with the break of area 5/5.30 (FIBO level 38.2%).

Charts from
Charts from

In the meantime, the uptrend is too strong in a short time : about +30% with five trading sessions. The volatility is high (in the high range of the BB), RSI is overbought, there is a gap down to cover. There will be a physiological price correction, probably.

Charts from

Charts from

Saturday, January 7, 2017

January effect.

The January effect is a calendar anomaly that occurs during the month of January. It provides a general increase in the average returns of the stocks during the first middle of the month.
A fortiori, it is true for the small caps more than mid and large caps.
It refers to a statistical behavior and in this way, the exceptions may exist. Anyway, the effect is consistent over the years and for the majority, it is relevant.
If we had an efficient market, it should not exist. Until proven otherwise, the market is not efficient (at least, not totally) and we have market phases where it exists and market phases where it disappears.

There are multiple reasons for that ; the main explanations are the following : it is a psychological matter because January is the first month to begin a good investment program or it is the result of the tax-loss selling , with regard to the end of the previous year.

For further info, see the links : ; ; .

Currently, it would seem to prove the rule. For the first days of January, FTSE ITALIA small cap index have performed better than mid and large cap.

Chart from

The following table shows some best performances (5 days), among the small caps stocks. The effect seems to occur this year.