Saturday, 16. December 2017  
22.08.2017 19:52
Author: Nic Wright

STOCK SCREEN: M&A In The Auto Industry - Stocks With Significant Upside To Intrinsic Value

 

M&A-activity in the auto industry is heating up again this week. Fiat Chrysler (FCA) Chief Executive Officer Sergio Marchionne has been a longtime proponent of consolidation, arguing that the auto industry wastes money by developing multiple versions of the same technology.

 

Since General Motors Co. rebuffed his approach for a merger two years ago, Marchionne has sought to eliminate debt at Fiat Chrysler to make the carmaker a more attractive partner down the road. In March 2017 Volkswagen global CEO Matthias Mueller told reporters in Germany that he would not rule out talks with Italian-American automaker Fiat Chrysler, according to Reuters. And in August 2017 speculation grows over China’s Great Wall Motors considering a bid for Fiat Chrysler’s Jeep.

 

Fiat is still looking for cooperation agreements to share investments in technology and reduce costs. While investors will have to wait to see if Great Wall have any intentions to pursue negotiations with Fiat, FCA shares and the whole automobile sector might be supported, as breakup fears focus the market on the Sum-Of-The-Parts (SOTP) valuation and not on earnings-based metrics which typically depress the value of most Auto-OEMs. Although the entire sector looks attractive on a SOTP basis, FCA is seemingly the only one currently with some potential to unlock it.

 

In looking for ideas this week, we screen the sector for stocks trading close to historic EV/Sales multiple lows and with significant earnings-based upside to our AVM's fair value estimate.

 

Here are the filter criteria:

1. Market capitalization above 1bn.

2. Upside to Intrinsic Value according to our AVM’s Graham estimate.

3. Upside to Intrinsic Value according to our AVM’s Greenblatt estimate.

 

Here is our list of stocks in alphabetical order. Intrinsic Value Model assumptions can be adapted to analyze different growth scenarios with our MODELER forecasting tool. Click and Analyze:

 

CLICK COMPANY NAME FOR DETAILED STOCK VALUE ANALYSIS

COUNTRY

LAST PRICE

MEAN MULTIPLE UPSIDE [%]

GRAHAM UPSIDE [%]

GREENBLATT UPSIDE [%]

PRICE / BOOK

DIVIDEND YIELD [%]

NETDEBT / EBITDA

 AISIN SEIKI CO LTD

 Japan

5400.00

19.3

36.7

60.8

1.1

2.4

-0.0

 BAYERISCHE MOTOREN WERKE AG

 Germany

79.33

273.8

126.9

201.6

1.0

4.7

-1.6

 DAIMLER AG-REGISTERED SHARES

 Germany

60.45

26.5

97.7

143.4

1.0

5.8

-1.0

 FIAT CHRYSLER AUTOMOBILES NV

 Netherlands

11.80

123.9

95.7

x

0.8

0.2

0.0

 FORD MOTOR CO

 United States

10.57

59.6

50.0

134.9

1.3

5.6

-1.0

 KIA MOTORS CORPORATION

 South Korea

35500.00

95.5

131.4

191.4

0.5

3.2

-0.2

 MAZDA MOTOR CORP

 Japan

1598.00

61.7

26.2

134.8

0.8

2.4

-0.4

 MITSUBISHI MOTORS CORP

 Japan

781.00

53.6

10.3

31.9

1.6

1.9

-3.4

 VOLKSWAGEN AG-PREF

 Germany

127.24

156.0

96.3

60.2

0.6

2.5

-0.7