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Samsonite International Summary

Core Content

• Company Overview: Samsonite International is a leading global travel luggage company operating in key markets such as Asia, North America, Europe, and Latin America.
• Industry Classification: ICB Industry - Consumer Goods; ICB Sector - Household Goods.
• Analysts: Mavis HUI and Mark LI.
• Analyst Rating: BUY with a 12-month price target of HK$25.45.
• Previous Price Target: HK$25.15.
• Market Data:
  • Issued Capital: 1,407 million shares.
  • Market Cap: HK$29,135 million / US$3,751 million.
  • Major Shareholders: JPMorgan Chase & Co. (12.9%), Wellington Management (8.8%), Morgan Stanley (6.1%).
  • Free Float: 72.3%.
  • Average Daily Volume: 3,533 thousand shares.

Key Financial Highlights (FY13)

• Net Sales: US$2,038 million, up 15% y-o-y.
• Net Profit: US$176 million, up 19% y-o-y.
• Core Profit: US$189 million, up 13% y-o-y.
• Pre-tax Profit: US$270 million, up 20% y-o-y.
• EBITDA: US$333 million, up 16.2% y-o-y.
• Core EBITDA Margin: 16.6% (up 0.4ppt).
• Tax Rate: 27% (up 1.3ppt).
• Inventory Days: 115 days (down 3 days).
• Net Cash: US$212 million, up 78% y-o-y.
• Dividend Payout Ratio: 45.4%.
• ROAE: 15.7% (up 0.6ppt).
• Core Net Margin: 9.3% (down 0.2ppt).

Segmental Growth (FY13)

• Asia: Net sales grew 16% (constant currency), core profit grew 13%.
• North America: Net sales grew 25% (constant currency), core profit grew 27%.
• Europe: Net sales grew 9% (constant currency), core profit grew 45%.
• Latin America: Net sales grew 12% (constant currency), core profit grew 24%.
• Corporate: Net sales decreased by 8%, core profit decreased by 8%.

Key Growth Drivers

• Strong Growth Prospects: Particularly in emerging markets and business/casual bag segments.
• M&A Opportunities: Expected to contribute to growth.
• Organic Growth: Management aims for >10% organic growth.
• Dividend Policy: Progressive payout, aiming for a ~2% yield.

Financial Forecasts (FY14–FY15)

• Net Sales: US$2,271 million (FY14) and US$2,519 million (FY15).
• Net Profit: US$217 million (FY14) and US$251 million (FY15).
• Core Profit: US$217 million (FY14) and US$251 million (FY15).
• EPS (HK$): 1.20 (FY14) and 1.38 (FY15).
• Core EPS (HK$): 1.20 (FY14) and 1.38 (FY15).
• Core EPS Growth: 14.5% (FY14) and 15.7% (FY15).
• PE (X): 17.3 (FY14) and 15.0 (FY15).
• Core PE (X): 17.3 (FY14) and 15.0 (FY15).
• EV/EBITDA (X): 9.1 (FY14) and 7.8 (FY15).
• Net Dividend Yield (%): 2.6 (FY14) and 3.0 (FY15).
• P/Book Value (X): 2.9 (FY14) and 2.6 (FY15).
• ROAE (%): 17.3 (FY14) and 18.2 (FY15).

Key Assumptions and Strategic Moves

• Expansion Plans: High Sierra brand introduced in India with positive response, planned to roll out to S. Korea, Australia, and Europe in 2014.
• Dividend Policy: Commitment to maintain a progressive dividend payout.
• M&A Strategy: Management aims to complete some transactions in 2014, leveraging its SAP system, warehouse capacity, and logistics for integration.
• Growth Outlook: Confident in sustaining double-digit sales growth and mid-teens net profit growth through M&A and organic growth.

Peer Comparison

• Samsonite:
  • PE: 17.3 (FY14) / 15.0 (FY15).
  • P/Sales: 1.7 (FY14) / 1.5 (FY15).
  • Yield: 2.6% (FY14) / 3.0% (FY15).
  • P/Bk: 2.9 (FY14) / 2.6 (FY15).
  • ROAE: 17.3% (FY14) / 18.2% (FY15).
• Nike (B):
  • PE: 22.7 (FY14) / 25.2 (FY15).
  • P/Sales: 2.3 (FY14) / 2.6 (FY15).
  • Yield: 1.3% (FY14) / 2.5% (FY15).
  • P/Bk: 5.2 (FY14) / 4.2 (FY15).
  • ROAE: 25.2% (FY14) / 26.3% (FY15).
• Adidas:
  • PE: 17.4 (FY14) / 14.4 (FY15).
  • P/Sales: 1.1 (FY14) / 1.0 (FY15).
  • Yield: 2.3% (FY14) / 2.8% (FY15).
  • P/Bk: 2.6 (FY14) / 2.3 (FY15).
  • ROAE: 15.4% (FY14) / 16.7% (FY15).
• Coach:
  • PE: 15.8 (FY14) / 14.5 (FY15).
  • P/Sales: 2.8 (FY14) / 2.7 (FY15).
  • Yield: 2.8% (FY14) / 5.4% (FY15).
  • P/Bk: 5.7 (FY14) / 4.2 (FY15).
  • ROAE: 37.3% (FY14) / 41.5% (FY15).
• Tumi Holdings:
  • PE: 24.8 (FY14) / 20.9 (FY15).
  • P/Sales: 2.9 (FY14) / 2.6 (FY15).
  • Yield: 0.0% (FY14) / 0.0% (FY15).
  • P/Bk: 5.2 (FY14) / 4.2 (FY15).
  • ROAE: 25.2% (FY14) / 26.3% (FY15).
• L'Occitane Intl:
  • PE: 18.9 (FY14) / 17.0 (FY15).
  • P/Sales: 2.0 (FY14) / 1.8 (FY15).
  • Yield: 1.9% (FY14) / 2.5% (FY15).
  • P/Bk: 2.8 (FY14) / 2.6 (FY15).
  • ROAE: 15.5% (FY14) / 15.8% (FY15).
• VF Corp:
  • PE: 20.4 (FY14) / 18.0 (FY15).
  • P/Sales: 2.2 (FY14) / 2.1 (FY15).
  • Yield: 1.7% (FY14) / 3.8% (FY15).
  • P/Bk: 4.3 (FY14) / 4.2 (FY15).
  • ROAE: 21.4% (FY14) / 22.2% (FY15).

Analysts' Recommendations

• DBSV Recommendations: Based on the Absolute Total Return* Rating system.
  • STRONG BUY: >20% total return over 3 months with identifiable catalysts.
  • BUY: >15% total return over 12 months for small caps, >10% for large caps.
  • HOLD: -10% to +15% total return for small caps, -10% to +10% for large caps.
  • SELL: >-20% total return over 3 months with identifiable catalysts.

Key Financial Metrics

• Operating Profit Margin: 14.6% (FY14) / 15.1% (FY15).
• Net Profit Margin: 9.5% (FY14) / 10.0% (FY15).
• Core Net Margin: 9.4% (FY13) / 9.3% (FY14).
• ROAE: 17.3% (FY14) / 18.2% (FY15).
• ROA: 10.7% (FY14) / 11.4% (FY15).
• ROCE: 16.1% (FY14) / 16.9% (FY15).
• Free CFPS (US$): 0.12 (FY14) / 0.15 (FY15).

Ratings History

• 19-Mar-13: Closing Price HK$17.58, Target Price HK$23.22, Rating: Buy.
• 24-Apr-13: Closing Price HK$18.94, Target Price HK$23.22, Rating: Buy.
• 22-Jul-13: Closing Price HK$20.75, Target Price HK$25.23, Rating: Buy.
• 28-Aug-13: Closing Price HK$19.48, Target Price HK$24.61, Rating: Buy.
• 27-Sep-13: Closing Price HK$22.00, Target Price HK$24.61, Rating: Buy.
• 31-Oct-13: Closing Price HK$21.20, Target Price HK$24.61, Rating: Buy.
• 29-Jan-14: Closing Price HK$22.20, Target Price HK$25.15, Rating: Buy.
• 6-Mar-14: Closing Price HK$20.90, Target Price HK$25.15, Rating: Buy.

Conclusion

Samsonite International is positioned for continued growth, with a focus on emerging markets and M&A opportunities. The company has shown strong financial performance and is expected to maintain its growth trajectory through strategic expansion and efficient operations. The analysts recommend a BUY rating, highlighting the potential for a 12-month total return of over 15% and the company's strong cash generation and progressive dividend policy.