Uplisting to US: 90% Upside
This pitch was shared by Clark Square Capital.
The idea is straightforward. Samsonite is a decent-quality stock at <10x NTM earnings that trades at a significant discount due to its Hong Kong listing. However, Samsonite will soon pursue an additional listing—likely in the US—which I anticipate will cause the shares to significantly re-rate.
- Samsonite announced on March 21 that it would pursue a dual-listing of its stock. This came after the company had received takeover interest from numerous PE firms. According to a Bloomberg report, Samsonite explored the possibility of a US listing in August 2023.
- Dual listing was again reiterated with Q1’24 results in mid-May: “As we announced in March 2024, the Company’s board of directors has authorized management to pursue a secondary listing of Samsonite’s shares. Advisors have been hired to begin preparatory work, and the process is at an early stage. We will provide further updates as and when appropriate”.
- A dual-listing is likely to 1) increase investor appetite—many investors cannot currently own the HK-listed shares, 2) increase the stock’s liquidity, and 3) increase the stock’s multiple to be more in-line with the US/European markets— the average NTM P/E multiple in the S&P 500 is ~22.5x, for instance.
- While the company has not divulged specifics regarding the dual-listing, I think it’s likely it will be in the US for multiple reasons: 1) Samsonite was initially listed in the US before it was acquired by CVC in 2007, 2) it has a significant presence in Massachusetts, where the CEO is based, 3) the company reports in US dollars, 4) the US (32% of revenue) is the largest market, and 5) the company would likely get a better multiple in the US than in Europe.
- There is not much clarity timing-wise, but I think it is likely that Samsonite will provide more information in August when they announce 1H results. Moreover, it will also host an Investor Day, although the timing is yet to be determined.
- Given their significant ownership stakes, the Chairman and the CEO are well incentivized to maximize per-share value — the Chairman owns 4% of the stock (worth $184m), and the CEO owns 2% of the company (worth ~$95m). I think they likely realized that they could get a better price in a dual-listing scenario than in a buyout, so it helps to have this alignment here.
A bit of background on Samsonite
Samsonite is the world’s largest travel luggage company, with a ~15% global share. The company designs, manufactures, sources, and distributes travel and non-travel products, including luggage, business and computer bags, outdoor and casual bags, and travel accessories. The company operates three core brands: Samsonite, Tumi, and American Tourister. Samsonite sells its products through wholesale (61% of sales), company-operated retail stores (28%), and e-commerce (11%). The company generated sales of $3.7B USD in 2023 and an adjusted EBITDA of $709m (a 19.3% margin).
In the last couple of months, Samsonite has traded back down to HK$22 — roughly the price it was at before the news of a potential takeout — for two main reasons: 1) Samsonite decided not to proceed with a buyout, and 2) Samsonite took down full-year guidance given weaker than expected Q1 results, with slower top-line growth, but this was due to FX and exceedingly tough prior-year compares.
There are a few noteworthy things to call out about the company:
- Samsonite went public in 2011 and was listed in Hong Kong for HKD 14.50 per share, or 18x earnings. The rationale back then was that they could more easily tap into the growing consumer class in Asia.
- The company operates in four regions: Asia (39% of sales), North America (34%), Europe (21%), and Latin America (6%). The US is the biggest country, with ~32% of sales. Following the US is China with 8% and India with 7%. Given their exposure to emerging markets, I view this as a long-term secular growth story.
- Coming out of COVID, the company has made considerable progress on margins, with EBITDA margins expanding +580bps (to 19.3%) since 2019. This was made possibly by eliminating ~$200m of fixed costs and through higher gross margins—due to pricing and a favorable mix shift from more significant sales in Asia and faster Tumi growth)—offset by higher advertising spend. Assuming no significant change in the promotional environment, I think EBITDA margins will likely stay in the 19-20% range over the next few years.
Note: Outside of the US, Samsonite is well diversified with its geographic exposure.
Samsonite presents a compelling longer term investment
Aside from the dual-listing thesis, think Samsonite is a compelling investment for the following reasons:
- Samsonite will likely see accelerating top-line growth over the next few quarters.
- The travel recovery still has legs.
- It’s very cheap! Samsonite is trading at <10x NTM earnings, a trough valuation.
- Samsonite started a capital return program in 2024, which should improve investor sentiment.
I will cover each of these in more detail below.
Samsonite will likely see accelerating top-line growth over the next few quarters.
- Samsonite’s Q1 showed lower-than-expected top-line growth, but this was more of an optical miss due to a few factors: 1) FX was a 3pt drag, CC growth came in at +4%, with mgmt soft-guiding to 5-6%, 2) Tumi shipments were substantial in early 2023 as there was a shortage in channels, and 3) 2Q23 wholesale orders were pulled into 1Q23 due to a warehouse issue.
- Importantly, 1Q24 was also comping the prior year with +57% growth. Comps ease significantly in the back half of the year (see below).
- Samsonite is guiding for HSD top-line growth for the year, with 5-7% CC growth in Q2. Given the weaker comps in 2H24, management thinks results will accelerate from here on out. The next few quarters will also benefit from increased store openings and advertising spending, which Samsonite is growing to 7% of revenue from 6.6% in 2023.
- Based on easing comps and management’s guide, Samsonite should likely exit Q4 this year at a HSD-LDD top-line growth rate.
Note: Comps ease significantly in Q3/Q4 of this year
The travel recovery still has legs.
- Before COVID-19, the core Samsonite brand grew 8% annually from 2009-19.
- In 2023, Samsonite’s sales of $3.7B were up 17.5% compared to 2019 on a constant currency basis (adjusting for its Russia exit and a divestment of eBags). This is a top-line CAGR of 4% —relatively tepid growth.
- Notably, the company mentioned that in 2023, units had just recovered relative to 2019, which means that revenue has been driven entirely by pricing. The lack of unit growth suggests that demand hasn’t been pulled forward thus far.
- Google search trends still point to strong underlying demand in the US and globally (see below).
- Global passenger traffic is expected to surpass 2019 levels in 2024! However, passenger traffic growth will still remain below trend (see below).
- Survey work (MS, Deloitte) suggests that consumers continue to exhibit high travel intent and prioritize travel over other spending categories.
- Putting this all together, I think Samsonite can continue to grow its top line at a faster-than-normal rate for the next couple of years. (Normalized growth is likely passenger air travel growth + a couple of points of share gains = MSD to HSD).
It’s very cheap! Samsonite is trading at <10x NTM earnings, a trough valuation.
- On consensus estimates, Samsonite is trading at 9.4x NTM earnings (at a 1% percentile valuation compared to its 10-year history) and 7x EBITDA (5%).
- There are no good public comps for Samsonite. I would say it’s not as good a business as European luxury (Kering, LVMH) but better than American luxury (Capri Holdings, RL, etc.). Kering trades at 19x NTM earnings, LVMH trades at 22x NTM earnings, and Capri trades at 9x earnings (10x EBITDA) but has lots of debt.
- If Samsonite were listed in another exchange, I would expect it to trade at a 15x to 20x FCF/EPS multiple.
Samsonite started a capital return program in 2024, which should improve investor sentiment.
- After paying out dividends from 2012-2019 and pausing them during COVID, Samsonite re-started dividend payments this past quarter. The dividend yield is currently 3.3% annually.
- Samsonite also announced a US$200m share buyback program on June 11, the first one since its listing in Hong Kong. At the current stock price, they could repurchase ~4.6% of outstanding shares.
Valuation & Model
I estimate that Samsonite can generate ~2.50 HKD per share of free cash flow in 2025. I value it at a 17.5x multiple (mid-point of 15-20x), which gets me to an upside target of 44 HKD per share — approximately 90% upside. At a 15x multiple, the upside would be +60%; at 20x, the upside would be ~120%.
Catalysts
- An announcement regarding the dual-listing plan and possible timeline.
- Accelerating top-line growth over the next couple of quarters.
Risks
- A weakening consumer could cause revenue growth to slow.
- An increased promotional environment might put pressure on gross margins.
- Volatile equity markets could postpone a dual-listing, or the company could cancel it altogether.
Great writeup, thanks, I own some without doing much of my own work yet.
I checked whether it would still be cheap even if margins reverted down by say 4ppt which is is.
Has anyone looked at:
1) whether Trump tariffs would hurt them much this time (did last time but I think Samsonite has made changes to supply chain since)
2) whether the “softening comp” argument above is also the case if comparing back to pre-Covid quarters
3) the actual underlying growth at retail of any of the brands, corrected for (eg) their move from wholesale to retailing which inflates the sales line.
Interesting! Would they just be listing existing shares on the US exchange i.e. no dilution to existing shareholders?
That’s my understanding. No dilution, just existing shares via ADR scheme or direct/secondary listing.
Could argue that through valuation is due to margin that are higher LTM than historically. I.e. net income margin is 11.5% vs. peak 9% in 2016/2017. So I guess it is not as cheap? Would be interesting to hear Clark’s thoughts on it.
Anyone have a clue about what will happen with the Samsonite unsponsored ADRs, SMSEY? With a sponsored ADR out there, or direct shares, I imagine one thing that could happen is that market demand for these would dry up, so the bid/ask spread would expand to the market maker’s spread.
You (or arbitragers) can convert the unsponsored ADRs to the underlying HK shares or the new, sponsored ADRs, whichever is more liquid or trades at a premium.
IB provides such service for a fee.
I didn’t know that, thanks
I’ve been looking into this and consensus seems too high. No criticism of CSV who was openly using consensus/guidance as the input. So best to value this with earnings at least 10% below. I’ve only looked at revenue rather than profits. Consensus is $3996m according to TIKR.
Q1 actual revenue vs. full-year forecast: Q1 has never been that small a proportion of a full year, and there’s nothing in the Q1 call to suggest that it was depressed in any exceptional way, nor are spot or Q2 FX much different from Q1.
The consensus implies ‘growth vs. 2019’ accelerates materially through 2024. Why should it? (not that I’ve looked at the gory details of 2019’s quarterly reporting). Again implies plausibly 5%+ lower revenue than consensus is more likely.
Warning after warning from luxury peers. Main weakness seems China which isn’t itself huge for Samsonite (8% of sales ish, exc ‘greater China’). But also USA, Europe not doing well in luxury. On the other hand, travel volumes are still holding up well, and Samsonite isn’t proper luxury.
Price war in India which is an important country for them.
I know that at least one broker has been downgrading, I don’t have access to the dates of others’ estimates.
The share price / multiple basically tell you the earnings are wrong! Maybe a miss/downgrade is ‘in the price’ but that’s not usually a great bet to make.
I still think it’s a huge value gap and a great catalyst, but do you get hit further by downgrades before you get the secondary listing? Q2 earnings likely 14th August, that’s the date of the board meeting. As CSV says above, they’ve soft guided to Q2 so a big miss of Q2 seems unlikely, it’s more that H2 forecasts (and outer years obviously on a full-year basis) would get cut.
And if margins come off just from e.g. some operating leverage / pricing in India, do investors worry that it’s the start of reversion closer to the older, far lower margins? (I don’t think that’s a justified concern, but you could see the multiple hit by such fears).
I’m keeping what I have but not yet adding.
Thanks, Ex-L. I agree. Given the weaker consumer environment, I think the most significant risk is that sales could soften here.
I’ve just been shown from Bloomberg the US credit card sales data for q2. I believe it’s own-stores and DTC (website) but I assume can’t capture wholesale revenues as it would be just “retailer name” on the credit card bill. Any card-data experts that can chip in?
Credit card data are -10% YOY which is surely not at all consistent with consensus c. +5% YOY global revenues. (I don’t know what brokers have for q2 US revenues).
Thanks, Ex-L. Was this for the core Samsonite brand, or Samsonite + Tumi + American Tourister, etc?
If you assume roughly the same mix as global, then the credit card data would only account for ~13% of sales (US is ~32% of total, with DTC/retail at ~40% of mix). Obviously, not good to see sales down… but not necessarily representative of the entire business.
Sadly unclear – it was described as “for Samsonite SA” and my inexpert belief is that it’s just tracking/capturing the merchant on credit card bills, which would be Samsonite whether it was Tumi, Tourister etc. from a Samsonite shop and maybe even Samsonite merchant from a Tumi shop. Bloomberg surely smart enough to at least capture Tumi sales if Tumi merchant is different.
i agree it’s not high coverage of total global sales but if it’s true, why would wholesale be doing particularly better/worse in USA than retail – base assumption should be same sales trends right?
In the same data have you seen other major brands (luggage company or not) experiencing large YOY drop in sales? I am trying to figure out whether it’s a broader US consumer trend.
I don’t have Bloomberg any more, I got it from a mate. For your Q you could look at large multibrand retailers or US retail sales data or maybe there is a US equivalent of the UK’s various retail sales trackers (barclaycard, British Retail Consortium, BDO…).
Anyone seen any broker research on Samsonite? I’d love to know their downgrades / new 2024 and 2025 EPS estimates. The company guided to a weaker Q3 (constant currency) so must be down YOY, and assuming that continues to Q4 it should be material downgrades.
Disappointing that mgmt said nothing about the dual listing timeline, whether shares will be fungible, whether any capital issuance at the time. Leaves the market to digest only the warning and the new unsurprising knowledge that it’s a USA dual listing not European.
got only one, Jefferies is cutting 2024 / 25/26 revenues by 6% / 9%/ 11% and Net Income by 11% / 15% / 19%. EPS 2024 is now 25c, unclear if that’s adjusted net income or not.
BofA cut 2024/25 EBITDA by 4%/5% and EPS by 4%/6%
Got their EPS or Adj Net Income estimates by any chance, or even EBITDA? Thank you!
Macq adjusted EPS is 0.268/0.286 for 24/25, or $392m/$414m, UBS is $352m/$371m.
Thank you!
UBS’ ADJUSTED 2024e (not unadjusted)is 352m?! That would be a very big cut. From a broker that doesn’t understand how a secondary listing works I’m less surprised, but still – is it possible those numbers are unadjusted? (Can compare vs 2023’s 392m adjusted)
DT, logic for thinking mgmt is throwing off privatization speculators and tanking the stock to their own benefit makes sense. Since this wouldn’t fly in US or Europe I imagine, would you be able to give more color on how common this is in China/HK stocks?
I think you are referring to IMAX China rather than Samsonite, so I answered here: https://www.specialsituationinvestments.com/2024/05/guest-pitch-imax-china-1970-hk/#comment-21565
Stock is down 15% since this was posted. Nothing major has really changed – new earnings came out, management reiterated dual listing as a priority and the company keeps slowly chipping away at its 4-5% shares outstanding buyback.
Sales slowed in Q2, rising only 1.5%, compared to 4.1% in Q1. The most impacted region was Asia, where revenues fell by 2.9%, with declines in China (-3.5%) and India (-11.3%). Outlook for the remainder of 2024 is cautious due to macroeconomic uncertainties and weakening consumer sentiment. Despite positive long-term trends in global travel, the company expects softer sales in the near term, particularly in Asia and North America. Taking H1 run-rate numbers, the company trades around 7.5x adj. EBITDA – similar to where it did as of write-up. During the H1 2024 earnings call, Samsonite reiterated that pursuing a dual listing in the U.S. remains a priority.
It’s notable that Samsonite (1910:HK) stock price has not benefited much from the very recent HK/China market melt-up.
I would have expected that Samsonite should benefit a lot from the reversal of sentiment against HK-listed stocks and China-focused companies , and that IMAX China (1970:HK) should benefit much less because the probability of a privatization deal declines.
So far the reality has been opposite to my expectation.
Samsonite is being hit pretty hard by the tariffs. Most of its production capacity is in China and Vietnam, and US accounts for 1/3 of its revenues. They just started production in Vietnam in Q4 2024.
What info/source do you have on the location of its production? Seems unlikely Vietnam is number 2 if they just opened there. And China was not a major source for UsA product, see the q4 presentation.
But I expect the stock (which was closed Friday) to get hammered again tonight, Monday HK time.
I’m also concerned that the tariffs and market turmoil may delay the re-listing catalyst.
Results came out with no big surprises thus far (but maybe we’ll see some deterioration in upcoming newer results). The dual listing was once again mentioned:
“The Company continues to make progress on preparing for a potential dual listing of its securities in the United States. The Board of Directors and management believe a dual listing will enhance value creation over time for shareholders by increasing trading volumes and making its securities more accessible to investors in the US and globally.”
Samsonite’s H1’25 results are out. The operational performance during the half-year has weakened, with a 6% decline in revenues, driven largely by lower wholesale customer purchases due to macro uncertainty/tariffs. It seems the results were better than the market had priced in, as the stock is up 7% since the earnings were released. During the conference call, management mentioned that preparations for the dual U.S. listing remain ongoing, albeit noting that it is more likely when “market conditions improve” (see the quote below).
“And then lastly, we continue to prepare for a dual listing of the company’s securities in the United States. That remains ongoing. However, we — as I signaled on the last call, we’re closely monitoring the current economic backdrop, market uncertainties. Our Board, our management team, myself continue to believe a dual listing of the company’s securities in the United States to enhance value creation for our shareholders over time. And I might say, and importantly, we are well positioned to proceed once trading and market conditions improve. We’re in a ready position is the way I would describe it. We’re really watching the market very carefully to get the timing of that right is what I would say.”
Not sure what “market condition” they are waiting for.
The US market has been on a roll, if we track the indices and read daily financial news.
The consumer discretionary sector (XLY) is certainly not doing as well as Nvidia, but I wouldn’t say the US market is currently undervaluing the sector either.
Tapestry Inc (TPR) is up 50% YTD, outperforming Nvidia.