Wry & Dry

After Ferrari's IPO comes...another Italian icon

Poste Italiane.

Whaaat?  Yes, the Italian postal service.

Readers were very excited about the IPO of Ferrari.  In fact W&D received more mail about Ferrari than any other subject this year.  But investors are not going to make a dime from it, priced on a P/E of 32.  W&D suggests that readers ponder the more boring upcoming float of 40% of Poste Italiane.

This is Italy's biggest privatisation in 16 years.  And is also a sign to foreign investors that Italy is moving toward a less regulated economy.

But with mail businesses the world over losing money (including AustPost) why would anyone invest in a mail company?  Well, the answer in the case of Poste Italiane is that it is less like a mail company and more like a financial services business.

ItalyPostal services make up just 14% of revenues.  The rest is essentially financial services.  The company has 13,200 branches across Italy - almost twice the combined number of Italy's two largest banks.  It also has a trusted local brand, hence its massive insurance business.  And now growing investment management business.

As The Economist bluntly puts it: These non-postal services are what make it possible to contemplate listing a chunk of what otherwise would be a loss-making delivery giant.

Total revenues at Poste Italiane were up by 7% to €16 billion, and operating profit was up by 26% to €638m in the first half of 2015.  Given how few big firms are listed on Italy’s stock market, and in the light of a string of mildly positive macroeconomic data, the firm may turn out to be an attractive investment for those betting on an Italian recovery.

Investors may also be seduced by the promise of a dividend payout of at least 80% of net profit in 2015 and 2016.

Good grief, sounds like an Australian bank. And probably a better bet than Ferrari.