Yacht maker’s Italy pivot shows the way for Prada

Ferretti SpA

08/06/2023 07:49

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Yawen Chen
       LONDON, June 8 (Reuters Breakingviews) -
C hinese-owned yacht maker Ferretti  9638.HK  is
testing uncharted waters. The Italian manufacturer of Riva
speedboats loved by Hollywood stars is set to be the first Hong
Kong-listed company to also seek trading in Milan. The
move offers little valuation upside, but it could
hedge growing geopolitical risks. If Ferretti can sail home with
ease, luxury group compatriot Prada  1913.HK  would be tempted
to follow.    
    With its homecoming, Ferretti is stealing a march on the $17
billion maker of pricey Galleria bags. Prada shares have been
trading exclusively in the Asian financial centre since the
company’s 2011 initial public offering. Yet that decision led to
paltry annual returns of 4%, including dividends, Refinitiv data
shows. Despite signalling a desire to trade shares at home,
owners Miuccia Prada and Patrizio Bertelli have been reluctant
to trim their large 80% stake, slowing down listing plans.  
    For Ferretti, Hong Kong has provided a helpful springboard.
By listing in the Asian financial centre, Chief Executive
Alberto Galassi managed to secure the around $1 billion
valuation he had failed to clinch in Milan in 2019. Having
conglomerate Weichai Group as a parent helped. Five Chinese
state-backed entities pledged to buy half of the new shares on
offer ahead of Ferretti’s $244 million IPO.
    The financial rationale of a second listing in Italy is not
immediately obvious. Ferretti shares trade at 12 times expected
net earnings of 78 million euros this year, lower
than Milan-listed rival Sanlorenzo’s  SNL.MI  15 times
multiple. Chinese state ownership and a more modest track record
are to blame for the discount. At an annual compound rate of
14%, Ferretti’s revenue growth since 2018 is well below the 23%
rate Sanlorenzo achieved.   
    Yet with tensions between China and the West intensifying,
Ferretti’s urgency to diversify its investor base is
increasing. Weichai, which snapped up the vessel maker in 2012
while in distress, plans to sell around half its 64% stake in
the new listing.   
    Ferretti’s imminent market debut suggests that technical
hurdles that appear to have slowed Prada’s dual listing plans
are not insurmountable. One problem revolved around an Italian
stock market requirement to have all shares in digital form. In
Hong Kong many shares still exist as physical certificates;
these are traded electronically only after being deposited in a
centralised system. To solve the issue, Ferretti obtained a
waiver from Hong Kong authorities to cancel its outstanding
paper stocks. Owners will have to deposit the shares with
brokers or registrars by a set deadline.  
    Ferretti’s seemingly swift journey leaves Prada with no
excuse. Lorenzo Bertelli, heir to the Prada fortune, has
been openly talking about the need to hedge geopolitical risks
via a European listing. Shifting winds may force such change
sooner rather than later.  
    Follow @ywchen1 on Twitter
    
    CONTEXT NEWS
    Yacht maker Ferretti said on May 28 that its main
shareholder, China’s state-owned conglomerate Weichai Group,
would sell up to 28.75% of the Italian group’s share capital in
a planned listing in Milan.    
    Weichai Group, through Ferretti International Holding SpA,
owns a 63.75% stake in the maker of Riva speedboats.   
    Ferretti, which floated in Hong Kong last year, aims to kick
off the share sale as soon as it gets the authorities’ approvals
and subject to market conditions, according to a filing to the
Hong Kong Stock Exchange.

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Graphic: Safer harbour    https://tmsnrt.rs/43AOzTE
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 (Editing by Lisa Jucca and Oliver Taslic)
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