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Italy's Moleskine fails to sparkle on market debut

By Antonella Ciancio

MILAN (Reuters) - Shares in upmarket notebook maker Moleskine made a lackluster debut in Milan on Wednesday as growth concerns and broad market weakness weighed on this year's first major stock listing in crisis-hit Italy.

The maker of notebooks based on originals used by Ernest Hemingway and Bruce Chatwin is the first company to join the main Milan stock market since the listing of cashmere brand Brunello Cucinelli nearly a year ago.

Shares in Moleskine closed 0.9 percent below their issue price at 2.28 euros, though Italy's all-share index <.FTITLMS> fared worse, losing 2.1 percent.

Moleskine shares had risen nearly 3 percent in early trade from the 2.30 euros price the company had set for its 488 million euro ($626.5 million) initial public offering (IPO).

"They tried to defend it at placement price but eventually gave up and it slipped back," a Milan trader said.

The Milan-based company was valued around 14.5 times its 2012 earnings before interest, tax, depreciation and amortization (EBITDA), a discount to Prada <1913.HK> and luxury brand Tumi , but in line with brands with strong margins and growth in foreign markets.

Moleskine, which also makes diaries and leather covers for tablet PCs, lacks the exclusive appeal of luxury names such as Prada or Salvatore Ferragamo <1913.HK>, whose shares rose in their stock market debut in 2011.

However, the company says it has revenue growth potential and margins above the luxury sector average.

"We are better than the average of luxury makers in terms of profitability," Chief Executive Arrigo Berni told Reuters at the market launch ceremony at Milan's stock exchange.

Founded in 1997, the company makes its thread-bound jotters in Asia, generating an operating margin of 43 percent, putting it in line with high-end luxury brands such as Louis Vuitton.

Bottega Veneta, owned by PPR , and Hermes have EBIT margins around 33-34 percent.

Moleskine generated revenues of around 78 million euros in 2012, a 16 percent rise on the year before and above an average 11 percent growth in the luxury sector, helped by new stores and stationery products. Profits rose 25 percent to 19.7 million euros.

Moleskine is the fourth upscale Italian brand to tap the stock market in under two years, following the IPOs of Prada, Salvatore Ferragamo and Cucinelli.

"I don't remember any recent luxury company which closed down on the first day," said Mario Ortelli, senior analyst at Bernstein Research. "They rather preferred not to float at all, like Graff and Moncler," he said.

"SIGNIFICANT GROWTH"

Berni said he expected "significant" growth in coming years as Moleskine developed applications and other digital products for a growing number of smartphone users and opens its first stores in China.

"We are not like Rolex, which makes exclusivity and price an integral part of its appeal," Berni said.

Moleskine sells 90 percent of its 15-euro notebooks outside Italy, which is struggling with a deep recession and stuck in political limbo after inconclusive elections.

"I think the management of Moleskine did a good job building the brand, but I think margins look pretty high and might come down in the future since they will need to invest in expanding their distribution channels and entering new product categories," said Scilla Huang Sun, who runs the JB Luxury Brands Fund with 320 million euros under management.

Moleskine offered 106.3 million shares, including 12 million new ones, meaning just over 50 percent of the company's shares are now traded on the market.

Demand for the shares has come from investors in Italy, Britain, elsewhere in Europe, the United States and Asia. The offer was 90 percent reserved for institutional investors.

"I hear the concerns that Italy doesn't have a government," said Raffaele Jerusalmi, CEO of Italian stock exchange Borsa Italiana, adding that the listing provided a sign of confidence.

"It is even more important to have a market flotation at this moment of uncertainty."

Private equity funds Syntegra Capital and Index Ventures, alongside founder Francesco Franceschi and management, will pocket most of the 244 million euros generated by the sale.

Moleskine has seen revenue growth of around 25 percent per year since Syntegra bought 75 percent for around 60 million euros in 2006. The company had revenues of 78 million euros in 2012.

Moleskine said remaining proceeds from the capital increase would be used to halve debt to 12 million euros, while retail growth would be funded through cash generation.

($1 = 0.7789 euros)

(Additional reporting by Elisa Anzolin and Stephen Jewkes, Astrid Wendlandt in Paris; Writing by Lisa Jucca and Antonella Ciancio; Editing by Helen Massy-Beresford and Will Waterman)

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