Ferrari

Point to understand in order to answer question

1) Ques one) IPO: An Overview. Both a spinoff and an IPO or an initial public offering
result in a new, public company. However, a spinoff is the creation of a new public
company out of a current public company, while an IPO is a private company going
public for the first time.
2) Ques Two) An operating margin is an important measurement of how much profit a
company makes after deducting for variable costs of production, such as raw
materials or wages. A company needs a healthy operating margin in order to pay for
its fixed costs, such as interest on debt or taxes.
Operating earnings is a corporate finance and accounting term that isolates the
profits realized from a business's core operations. Specifically, it refers to the
amount of profit realized from revenues after you subtract those expenses that are
directly associated with running the business, such as the cost of goods
sold (COGS), general and administration (G&A) expenses, selling and marketing,
research and development, depreciation, and other operating costs.

Operating earnings are an important measure of corporate profitability. Because the

metric excludes non-operating expenses, such as interest payments and taxes, it
enables an assessment of how well the company's chief lines of business are doing.

https://www.investopedia.com/terms/o/operatingearnings.asp
https://www.wallstreetprep.com/knowledge/working-capital-turnover-ratio/#working-capital-
turnover-calculator
 Networking capital :

Working capital turnover is a ratio that measures how efficiently a company

is using its working capital to support sales and growth

In practice, the working capital turnover metric is a useful tool for evaluating
how efficiently a company uses its working capital to produce more revenue.
To calculate the turnover ratio, a company’s net sales (i.e. “turnover”) must be
divided by its net working capital (NWC).

While the working capital metric can be used – i.e. current assets minus
current liabilities – the net working capital (NWC) is a more practical measure,
since only operating assets and liabilities are included.
(The starting line item on the income statement is revenue (i.e. the “top line”),
which measures the total monetary value of the goods and services sold by a
company in a specified period.)

Net fixed asset turnover :This efficiency ratio compares net sales (income statement) to
fixed assets (balance sheet) and measures a company's ability to generate net sales from
its fixed-asset investments, namely property, plant, and equipment (PP&E).

Question 3
Ans: Ferrari went Public with 48-53$ per share, currently 384 $ per share
The only related auto manufacturer transaction was the 2012 acquisition of Aston Martin by
a private equity firm that had occurred at an EBITDA multiple of 9.9 times but aston martin
had been poorly performing and unprofitable at the time of acquisition and had lower brand
loyalty than Ferrari.
The interest report suggest that investor interest in the Ferrari IPO was so high that the deal
was expected to be as much as 10 times oversubscribed . (page 8-9)

If we price the share at 50 $

The exchange rate is 1.1375
Then, 50/1.1375 =43.956 EUR
Shares offered for IPO= 17.173 million shares and if we price it at 50$ then we get
(17.173*50$)= 858.65 million dollars through IPO.

P/E ratio = Share price today/ EPS=

P/E Ratio=Earnings per shareMarket value per share

FOR Ferrari

2014 DEBT NO. OF USD/EUR EBITDA Enterprise Share Implied

EBITDA (EUR) SHARES EXCHANGE Multipl value price share
(EUR) RATE e in EUR price
IN USD
687 2300 172 1.1375 12.738 8751.006 37.505
All numbers are in millions

EV=EBITDA×EBITDA Multiple

Implied share price= Equity value/no. of shares= 6451.006/172= 37.505

Eq val= EV-DEBT= 8751.006-2300 = 6451.006

Share price in USD= 37.505 *1.1375=42.66

DCF calculation

2014 2015 2016 2017 2018 2019

Total 2762 3027 3292 3556 3844 4126
revenue
Total 398 447 508 567 624 669
operating
PROF EBIT
EBIT(1-T)
Dep& 289 317 339 345 353 369
Amort

DIversifing their income source by giving branding