Chrysler Group's financial performance will be essential in creating value for shareholders of the new automotive-focused Fiat S.p.A. In a poll started by Automotive News Europe, financial analysts said that Chrysler could add between 2.75 euros and 5.40 euros (about $3.70 to $7.20) per share to Fiat's basic value.
Analysts consider Fiat's 20% stake in Chrysler, currently with a zero book value, to be the biggest positive element for the new Fiat S.p.A, which will consist of the Fiat, Alfa Romeo, Lancia, Ferrari and Maserati car brands when trading starts on Jan. 3.
On the same day, Fiat's truck and tractor units will be spun off into a new unit called Fiat Industrial S.p.A. Analysts predict that Fiat's shares could be worth about 6.10 euros per share while Fiat Industrial shares will trade at 8.20 euros. Fiat's automotive business represents 63% of the group's expected 2010 total revenues; however, analysts give a higher value to the industrial unit's shares since the auto business will have larger investments to fund and will have lower profit margins.
In the last few weeks, Fiat shares have traded slightly above 10 euros. In particular, Morgan Stanley's Stuart Pearson said that Fiat's stake in Chrysler and increasing synergies and business between the two automakers could add another 5.40 euros per share to 7.30 euros value he now expects for the new Fiat S.p.A. Meanwhile, Max Warburton at Bernstein Research considers the value of the Chrysler stake at 2.75 euros per share, which is more than half of the 5.20 euros he forecasts for the new Fiat. Furthermore, Banca IMI's Monica Bosio factors in 4.50 euros per share linked to Chrysler – that is 3.30 euros for the value of Fiat's stake and 1.20 euros in potential synergies – in her 7.40 euro price target for the new Fiat. [via autonews - sub. required]