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Finmeccanica (FNC IM): Forward

We are happy to present a research update and also a response to an anonymous author’s bearish case for an investment in Finmeccanica. Despite the best efforts of Caesar Augustus, as the author calls himself, to portray an investment case in Finmeccanica as an outright foolish one, the author’s case is anchored on historical events, false assertions and incorrect hypotheses of both current and future business prospects of the company. We are most grateful for the earnest attempt at a bearish argument against Finmeccanica, as we publish research specifically to elicit a debate. Augustus has affirmed our bullishness in finding no deal-killing reasons to avoid the shares.

Just after the bearish article was published, which speculated that restructuring would be impossible to achieve and the plan would be delayed, the company hosted an investor day which presented an industrial plan with exactly the same components we mentioned in our original report: reductions in R&D and capital spending, cost cuts, expanded operating profit margins, debt reductions and non- core asset sales. Near-term improvement in guidance includes no heroics, nor all the cost savings identified by new CEO. Trading at 5.4x ’16 EBITDA (47% discount). Significant upside remains.

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Disclaimer:

This article has been distributed for informational purposes only. Neither the information nor any opinions expressed constitute a recommendation to buy or sell the securities or assets mentioned, or to invest in any investment product or strategy related to such securities or assets. It is not intended to provide personal investment advice, and it does not take into account the specific investment objectives, financial situation or particular needs of any person or entity that may receive this article. Persons reading this article should seek professional financial advice regarding the appropriateness of investing in any securities or assets discussed in this article. The author’s opinions are subject to change without notice. Forecasts, estimates, and certain information contained herein are based upon proprietary research, and the information used in such process was obtained from publicly available sources. Information contained herein has been obtained from sources believed to be reliable, but such reliability is not guaranteed. Investment accounts managed by GreenWood Investors LLC and its affiliates may have a position in the securities or assets discussed in this article. GreenWood Investors LLC may re-evaluate its holdings in such positions and sell or cover certain positions without notice. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of GreenWood Investors LLC.

Past performance is no guarantee of future results.

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