Allegra Perry Comments: Moncler Shares Soar On Luxury Skiwear Maker’s Trading Debut

December 16, 2013, Bloomberg Businessweek

Moncler SpA (MONC) opened 41 percent higher than its initial public offering price in the first day of trading for the Italian luxury skiwear maker after investors sought about 27 times the amount of stock available.

The shares started trading at 14.40 euros in Milan, giving the company a market value of 3.6 billion euros ($5 billion) and putting Moncler on track for the biggest first-day gain among IPOs worth more than a billion dollars in Europe this year. They were offered to investors at 10.20 euros apiece.

The maker of $1,220 quilted polyester jackets follows both Salvatore Ferragamo SpA (SFER) and Brunello Cucinelli SpA (BC) in offering stock to the public as Asian demand for luxury goods fuels earnings growth and draws investors. Shares in Cucinelli, the maker of $3,195 cashmere cardigans, and Ferragamo, which sells $675 patent-leather platform heels, have more than tripled since they were listed in Milan in 2012 and 2011, respectively.

“Like we’ve seen in the last few IPOs in Italy in luxury, there tends to be a lot of demand for these brands because there aren’t that many around,” Allegra Perry, an analyst at Cantor Fitzgerald, said on Bloomberg Television’s “On The Move.”

The shares traded at 14.40 euros as of 1:26 p.m. A close above 14.13 euros would eclipse October’s 38 percent first-day gain of state-run U.K. postal operator Royal Mail Plc. (RMG)

Valuation Multiples

Moncler trades on a multiple of 17.5 times enterprise value to estimated 2014 earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. Ferragamo trades at a comparable ratio of 15.5 times, while Cucinelli is more expensive, trading at 25.6 times.

“With an opening of this kind, Moncler’s multiple becomes truly high-end,” Mario Ortelli, an analyst at Sanford C. Bernstein in London, said by phone.

Moncler is seeking to capture a larger slice of the $101 billion designer clothing market by enlarging its store network and wwwuct range, according to Chairman Remo Ruffini, who isn’t selling any of his 32 percent stake in the offering.

The company has about 100 of its own outlets and also distributes wwwucts in department stores as well as online. The skiwear maker may acquire a knitwear wwwucer to accelerate development of the category, Ruffini said today in an interview on Bloomberg Television.

“We don’t want to put a label on any wwwuct,” Ruffini said. “We want to make something special.” Buying one of Italy’s manufacturers could speed up the process, he said.

Riskier Investment

The expansion is aimed at maintaining growth that’s outpacing rivals — even Cucinelli. Sales rose 35 percent to 489 million euros in 2012, while revenue at Cucinelli increased 15 percent to 279 million euros.

“Moncler will continue to grow more than 20 percent in the next two years,” said Ortelli. “In the medium term, management’s challenge is to shift into other wwwuct categories” without hurting profitability.

Moncler’s reliance on winter apparel, which accounts for about three-quarters of sales, makes the company a riskier investment proposition than the likes of Cucinelli, according to Rahul Sharma, managing director of Neev Capital in London.

The share offering also comes as luxury makers from Louis Vuitton to Gucci report slowing sales growth. The luxury market globally will advance at the slowest pace since 2009 this year amid slack Chinese consumption and a weaker Japanese yen, according to a Bain & Co. forecast in October.

Biggest IPO

Moncler’s private-equity owners raised about 784 million euros after selling shares at the top of a targeted range. The institutional offer was more than 31 times oversubscribed, while retail investors sought about 14 times the amount of stock offered.

Investor appetite for European equities has helped companies raise about $35 billion in IPOs this year, more than double what they sold in 2012, according to data compiled by Bloomberg. Moncler is the biggest IPO in Italy since Enel Green Power SpA listed in November 2010.

Most of the proceeds from Moncler’s IPO will go to Eurazeo SA, a French private-equity firm, and Carlyle Group. The owners exercised an over-allotment or “greenshoe” option to increase the offering size by 15 percent. About 31 percent of Moncler will be publicly traded after the IPO.

Moncler aborted plans to list in 2011 in favor of a sale to Eurazeo. The private-equity firm owns a 45 percent stake and is selling 14 percent in the IPO, the terms show. Carlyle Group is divesting half of its 18 percent holding.

Bank of America Corp., Goldman Sachs Group Inc., and Mediobanca SpA are managing the sale, along with banks including UBS AG, JPMorgan Chase & Co., and Nomura Holdings Inc. Lazard Ltd. and Claudio Costamagna are advising Moncler on the IPO.