NEW YORK — Two Italian luxury names will go public in the next nine days to raise as much as $3 billion, but market insiders are mixed on how well the stocks will perform.
While analysts are bullish on the strength of the luxury sector in general, recent volatile performance of some firms creates uncertainty for the market debut of Prada SpA and Ferragamo SpA.
“[But] the footwear space has been pretty good,” said Susquehanna Financial analyst Christopher Svezia. “We’re in a strong cycle of trends, and [launching IPOs] has been a long time coming for these companies.”
Prada goes public Friday on the Hong Kong exchange. It will float nearly 17 percent of the firm’s capital to raise a targeted $2.3 billion. Next Wednesday, Ferragamo will list 22.7 percent of its share on the Milan bourse to raise about $623 million.
Analysts are concerned about the firms’ high price-to-earnings ratios in light of choppy demand in the equity markets. Prada has priced its stock at a multiple of 27 times its EBITDA, while Ferragamo’s IPO values the firm at about 24 times its profit.
In comparison, a basket of six other luxury goods firms trade at an average 21 times forecasted full-year earnings, according to Goldman Sachs Group.
Morningstar analyst Paul Swinand said, “If it’s true that Prada is five times oversubscribed, then demand is quite high and you’d expect the shares to close higher when it launches. But then again, the initial price is already so high. Their comps are monster this year, but their store base is very young, plus we’re in an inflationary luxury cycle.”
While declining to comment specifically on this month’s IPOs, Erwan Rambourg, analyst at HSBC Bank in Hong Kong, offered an analysis of the performance of L’Occitane, another European company that went public in Asia last year.
“L’Occitane was priced at the mid- to high end of the range and subsequently did nothing for six months,” said Rambourg. “The market probably had to digest the multiple and start projecting the growth of the following year to see earnings upgrades and the stock moving upwards.”