Analysis of Emma Villas - The latest European IPO in the luxury holidays market
Moreover The Week in the Markets & our Portfolio Management
Hi there!
Today, as we did before with other IPOs like The Italian Sea Group or Ferretti, we believe we are once again the first to bring the independent analysis of this Italian small cap to the spotlight.
The Week in the Markets: Summary of the key events of the week that are influencing the markets. The confirmation of the Fed's pivot and the new trends for 2024.
Emma Villas: Analysis of an unknown microcap in the luxury holidays industry which has recently conducted its IPO. Family owned, robust business model (>40% gross margin), net cash financial position and continuous growth for the last decade made us have a look at it during the last month (as previously shared). Today, we want to share the results of our independent analysis
Portfolio Management: Lot of movements, several new companies in the Wachtlist & Radar to play hat we believe it is coming aaand another great week
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The Week in the Markets
The week has been defined by the CPI data and the Wednesday FED meeting, where Powell confirmed the Pivot and began considering interest rate cuts (3 according to the FED, up to 6 according to the market) for the coming year. This continued the movements we have seen in the market in recent weeks, with small caps continuing to gain ground against large caps (though it only serves to mask a year dominated by passive investment and the "magnificent seven"). Sectors more exposed to leverage, such as REITs, continue to soar.
In terms of indices, once again, the Russell 2000 has been the best performer of the week - and since the late October lows, it has already risen more than 20%. Generally, there have been gains in all indices - with several of them at yearly highs. In fact, the only one in the entire landscape that is in the red is the Spanish Ibex35. This is due to the heavier weight of the banking sector (which performed quite poorly this week) and the underperformance of Telefonica.
The upward movement across all countries (where emerging markets like Mexico particularly shone this week) is also aided by a weaker dollar (which has been moving in a sideways range of 100-105 for most of 2023).
Regarding sectors, REITs, as mentioned earlier, were the most outstanding, and it's worth noting the strong performance of $ SLG - which we've been discussing for weeks - Like REITs, utilities initially responded well to Powell's speech and were among the best performers of the day but deflated for the rest of the week.
Energy has recovered a bit after last week's declines, although in terms of Natural Gas, the TTF continues to bleed, with industry "end of winter" projections now rising to 54%, and weather forecasts in Europe for the next 15 days not being particularly mild.
Bitcoin and the rest of the crypto market have had a consolidation week (some may be surprised to call a -4.5% movement consolidation, but it's a very volatile asset class, and it has truly been a quiet week after the recent gains).
As we have discussed since early November, we believe the trend has shifted, and this week has only solidified that the winning trends will be quite different from those of 2023. We are genuinely pleased because we think we are well-positioned in these trends, beyond the extraordinary performance of the market in the last month and a half.
Macro data
US
PPI (Nov) act: 0.9%, exp: 1%, prev: 1.3% US PPI ex-food & energy (Nov) act: 2%, exp: 2.2%, prev: 2.4%
CPI (Nov) act: 3.1%, exp: 3.1%, prev: 3.2% US Core CPI (Nov) act: 4%, exp: 4%, prev: 4% - (Housing prices increased by 0.4% after a 0.3% rise the previous month. Used cars and trucks rose by 1.6% -after 5 consecutive months of declines)
Europe
UK Manufacturing PMI (Dec) act: 46.4, exp: 47.5, prev: 47.2 UK Services PMI (Dec) act: 52.7, exp: 51, prev: 50.9
UK GDP (Oct) - act: -0.3%, exp: -0.1%, prev: 0.2%
Germany Manufacturing PMI (Dec) act: 43.1, exp: 43.2, prev: 42.6.
Germany Services PMI (Dec) act: 48.4, exp: 49.8, prev: 49.6
Zoom of the week
The map of the Fed's interest rate cuts shows an expectation of about 3 rate cuts of 0.25% each for the coming year. The Fed projects long-term interest rates to be around 2.5% (though we wouldn't take this too seriously, but that's how things are seen as of today).
However, as is often the case, the interesting aspect lies in what is outside the central focus. It appears that there might be some pressure on the Fed to lower rates more than projected yesterday, and especially starting early (March/April) to have some impact before the second Tuesday of November. Christine Lagarde (ECB) mentioned on Thursday that in her meeting with Powell 10 days earlier, there was no discussion of lowering rates—quite a turnaround for Powell just a few days later. In fact, Yellen appeared on CNBC Thursday morning to state that she expected inflation to reach 2% by the end of 2024, and that it would be normal to start lowering interest rates.
It's interesting that there is such a difference between the 3 interest rate cuts of 0.25% each projected by the Fed next year and the 6 projected by the market. Nevertheless, we believe that the truly interesting aspect is the starting gun; if it is as early as March, it will be quite bullish for certain types of stocks.
In other words, besides the confirmation of the Pivot, the events on Wednesday clearly showed us the direction our investments should be aimed at in 2024 to take advantage of the macroeconomic environment.
Analysis of Emma Villas - The latest European IPO in the luxury holidays market
What is Emma Villas and why are we talking about it today?
In recent weeks, we have been drawn to an IPO that has gone largely unnoticed by the market, partly due to the company's small size (barely €22MM) or the lack of similar players in the industry. We are talking about Emma Villas, a small luxury vacation home rental company that operates mainly in Italy. It manages more than 550 Italian Villas, mainly in Tuscany, with multi-year contracts where they have the exclusive management of the properties.
Their business model differs from that of Booking since they are the operator, not just a marketplace. However, we must also mention that, in terms of their international expansion, they recently launched Chiara Travel a few weeks ago. Chiara Travel is a marketplace for booking luxury villas for vacation use in the main tourist destinations of Europe ( Greece, Spain, Portugal, Croatia,..)which currently has 160 properties listed and the intention to continue growing to 600 in the short term.
The founder, CEO, and sole shareholder of the company until the IPO, holds 86% of the shares. The funds raised will be used for international expansion (they have just launched a vacation rental marketplace abroad) and investments in their technological platform and network of sales agents to attract more villas.
With the number of bookings growing at double-digits and the average price by 5.5%, with presumably continued trend in 2024, the company is at a sweet point to accelerate growth in the mid-term both through M&A and organically
We specialise in discovering entirely unknown companies, much like The Italian Sea Group was when it went public in summer 2021, or even Ferretti this year. That's why today we want to share our independent analysis of Emma Villas to understand whether we might be facing another tremendous opportunity or if there is any non-obvious reason important to take into account.
Our analysis includes a detailed explanation of its business model and strategy post-IPO, analysis of its finances, our valuation of the company and our decision/strategy for Emma Villas.
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