Like its cars, Ferrari shares won't come cheap or easily

By Agnieszka Flak

MILAN (Reuters) - Alessia Scipione played in Ferrari bumper cars as a child, avidly follows her favourite team during Formula One races and when the Italian sportscar maker goes public on Wall St on Wednesday she may get a chance to own a small piece of it.

Or so she hopes, because like its sportscars with the prancing horse logo, the shares will not be cheap or easy to buy with Ferrari enthusiasts worldwide clamouring to buy into a brand with a cult-like status.

"I will probably never be able to afford a Ferrari, but if I manage to buy some shares, I could at least say I'm part of the Ferrari story, something Italian that you can be proud of," the 38-year-old translator from Pescara, central Italy, said.

With only 10 percent of the Italian maker of supercars on offer, demand outstrips supply, and the stock may price at the top of an indicated range of $48-52 per share later on Tuesday, people close to the matter have said.

Ferrari's status as the maker of exclusive high-performance cars for the super rich such as the 1 million euro ($1.14 million) hybrid LaFerrari and the 235,000 euro 488 Spider is driving the frenzy around the listing.

"With luxury it's a lot about emotion and allure," one U.S. investment banker said. "People will put money on Ferrari on the promise of what it represents and could be."

The shares are expected to sell in no time, bankers close to the deal said.

But investors could be ignoring challenges that risk constraining company growth, including the limited number of cars the firm can produce without losing its exclusivity, emissions limits and an economic slowdown in China that has already hit sales of engines to sister-brand Maserati.

Parent Fiat Chrysler Automobiles (FCA) has deliberately kept the share offering small as it seeks to position Ferrari among luxury goods stocks that trade at multiples more than double the average for carmakers.

Some analysts have advised caution when putting money on a low-growth, capital intensive carmaker that may struggle to justify a luxury valuation in the long run given its profit margins and the high investment needed to put its logo on other exclusive products.

Ferrari's profits have nearly trebled over the past decade and its 14 percent operating margin - operating profit as a percentage of sales - is unmatched by any carmaker bar high-end sports car rival Porsche. But those margins are still well below luxury brand Prada's 26 percent and they have been pressured by rising costs.

Its revenue growth has been slower than most European luxury goods firms and the money it invests to develop new models and engines is more than double, depressing its return on capital.

RACING START

Nevertheless, Ferrari shares will get off to a roaring start on their Wall Street debut under the ticker symbol "RACE" on Wednesday, analysts said.

But trading will remain volatile at least until it is spun off early next year and the free float rises to over 60 percent, potentially making investing in the stock a hard-to-predict bet, they added.

The small initial public offering and expected volatility pushed many investors to play the seemingly safer Ferrari bet by investing in its parent after FCA said in October last year it would hand out the rest of its stake in the carmaker to its own shareholders.

FCA shares have jumped more than 90 percent since then.

"You're ultimately getting a luxury goods company inside of FCA ... this is a unique investment opportunity," said Adam Wyden who manages New York-based hedge fund ADW Capital and invested in FCA when Ferrari's spin-off was announced.

For Ferrari fans it's an investment of the heart first.

"Owners will buy the stock because they support the brand, have a passion for the Ferrari mystique; there is a sense of loyalty that doesn't fit with normal investor strategies of supply and demand and making money," said Joe Adams, president of the 6,000-member Ferrari Club of America.

"Most of the owners I've spoken to are going to buy shares and that will drive the price up. It's like with the cars, they are taking the same strategy."

($1 = 0.8811 euros)

(Additional reporting by Lauren Hirsch in New York; editing by Susan Thomas)