*STOCK THREAD* Banca FarmaFactoring $BFF. Italian, €1.45b market cap, transforming from a (largely unknown) domestic Italian factoring business to a Pan-European speciality giant. FY23e target price of €13 EUR = 62% upside, 20% IRR’s on base case w/ no M&A.
History: $BFF was started in 1985 by a consortium of pharmaceutical suppliers in Italy to factor their receivables from Italian Public Administrations. This is still the core biz. Example: Pfizer sells 1m vaccines to the Italian gov - instead of waiting 200 day avg DSO to be paid
They sell the receivable to BFF at ~98c on the $1. BFF waits, collects and pockets that spread. Additionally, there is a EU Directive stating that EU PA’s don’t pay on time, they incur a Late Payment Interest (LPI) which is ~7% and collected by BFF through the courts
Investment case: Under the lead of Massimiliano Belinghieri (ex-Apax, HBS, McKinsey) who recently just executed a REVERSE ABB (first time I’ve ever seen this) to buy 50m EUR worth of stock off previous PE owners (he now owns 6% of the co, 80m EUR so obvs v aligned)
The company is utilising their relationships with its big healthcare supplier customers to grow their receivables book across Europe (IMO volume and thus revenue growth will be >10% over the N5Y). This is without forecasting ANY M&A despite the CEO being an expert here
As evidenced by his purchase of the forced sale of DEPObank from the PE consortium that floated Nexi for 3x PE (synergies set to come through this year in FY21e). Thus the set up is a company with a 32% ROE, set to grow revenue at >10% over the N5Y trading on a FY23e PE of 7x
On 200m EUR of FY23e NPAT (company guided too in the CMD a few weeks ago). Given high likelihood of accretive M&A, beats on DEPOBank synergies, volume acceleration post Covid (more health products sold to PA’s), LPI build-up from FY20 - I think 18-23% IRR’s over the N5Y. DYODD.

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