Fiat target price reached for the year, but holding on...

Just a short post to say that Fiat's one year target price of EUR 19.33 has been reached, but since this is a stock that - as mentioned in my previous post on the company - is supposed to double in three years, I will not cash in on this one. Still too much upward potential, in my opinion. Keep following this one! As I write, gold has broken through the 667 resistance and the picture for the miners looks much brighter now as well. All & all, it sounds like a good time to take a holiday.

Fiat Group share price to double within three years?

I cannot hide the fact that I've always had a love for Italian cars. Whereas colleagues tend to go for Volvos, BMWs or Audis, I have always driven Italian cars and I am not planning to change. In December 2005, I recall having mentioned that three car makers I considered good to have in one's portfolio: Toyota because of it's strong position in the US market and innovation in green technologies (which I think have a great future in this industry), Tata Motors because of its position in the Indian market - which is a real growth market - and Fiat, for the simple reason that the company seems to crawl out of its financial pit. Whilst Fiat only launched a couple of interesting new models in 2006, the Sedici, the Alfa Romeo Spider and the Alfa Romeo 159 Sportwagon and the New Ducato, 2007 looks much more promising. With the launch of the Fiat Bravo, Linea and 500 next to the Alfa Romeo 159 Crosswagon, the 8C Competizione and the New Scudo being planned, 2007 is certainly going to be a critical year in the company's latest business plan, presented last November. The four-year plan included predictions on the number of worldwide car registrations. Lancia is expected to be the fastest growing brand in the Fiat Group, but needless to mention that the bulk of the Group's growth comes from the Fiat brand, which already makes up some 70% of the Group's car registrations. The key figure is the expected growth of 65% in worldwide Fiat Group car registrations, which I would say is at the least ambitious. This growth is expected to come mainly from China & India (2010/2006 =+825%), Russia (to 130k units from scratch), Turkey (+91%) and Western Europe (+43%). It is no secret that the car industry is very volatile, with high fluctuations in market shares. This explains why a 43% growth in Western Europe may actually be feasible as it only represents a market share increase from 8% to 11%. Knowing that Fiat holds quite a strong position in many of its key growth markets, growth should certainly be very healthy in the coming years. The above is reflected in the company's financial targets: Group revenues are to increase by 7.6% y/o/y. As if that is not enough, EBITDA is expected to increase from Eur 3.6bn in 2005 to Eur 8.6bn in 2010! This means an increase of 139%! Now, this is all very nice and very ambitious but these are simply targets set by the company itself and give no reason to believe that these targets are actually going to be met. But the thing that does give me confidence is the fact that the financial improvements made in 2005 and 2006 are to be admired, especially when it comes to improvements of the bottomline. Today, Fiat S.p.A. trades at Eur 14.50. I am of the opinion that the Fiat share price could double in three years (certainly beats putting the money in your bank account), even if actual results are somewhat shy of current targets. EPS should reach at least Eur 2.50 in 2010.

Capitalia: the next prey?

Last year, Dutch bank ABN Amro took over Italy-based Banco Antonveneta. To many investors, this seemed a very risky move as the Italian banking industry is not known to be the easiest one to break into. ABN Amro has certainly experienced this, but succeeded at the end of the day. Banco Antonveneta, being the eight largest banking group in Italy, only holds a 3% market share in the Italian market and should therefore certainly not be considered the end of ABN Amro's Italian ambitions. Keeping in mind the above whilst also considering the 7.7% stake that ABN Amro holds in Rome-based Capitalia Gruppo Bancario (MIB:CAP), the most likely scenario is easy to guess. Reuters also mentions that 'corporate marriage' is high on shareholders' agendas. With net profit expected to rise 27% to EUR 1.4 bln, the bank is certainly expected to perform well, which is also reflected in the share price. To a certain extent, the share price includes an acquisition premium, but this premium did partly evaporate as Banca Intesa and Sanpaolo IMI merged to create Italy's biggest domestic lender and a European top eight bank. ABN Amro focuses on Antonveneta "for the time being", so says ABN Amro CEO Rijkman Groenink. No further comments were given with regard to a potential merger of Antonveneta and Italy's fourth largest bank Capitalia, but the likelihood increases day by day. Speculative buy at a current price of EUR 7.10.