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Samsonite International 2013 Summary

Core Content

Samsonite International (1910.HK) reported a solid performance in 2013, with a 15.0% year-over-year (YoY) increase in sales and an 18.6% YoY increase in net profit, aligning well with market expectations. The company experienced good sales growth across all regions and strong growth in its new brands, indicating effective brand development and market penetration.

Key Financial Performance

• Net Sales: Increased by 15.0% YoY to US$2,037 million.
• Net Profit: Increased by 18.6% YoY to US$176 million.
• Adjusted EBITDA Margin: Increased by 40 basis points (bps) to 16.6%.
• Sales Growth by Region:
  • North America: 24.6% YoY (14.0% excluding new acquisitions).
  • Asia: 15.6% YoY.
  • Latin America: 11.7% YoY.
  • Europe: 9.2% YoY.
• Operating Profit: Increased by 16% YoY to US$281.3 million.

Positive Aspects

• Strong Execution of New Brands: "American Tourister" saw a 23.4% YoY increase in sales, and "Hartmann & High Sierra" had a 197% YoY increase, highlighting effective brand development.
• Good Expense Control: The company managed its expenses effectively, contributing to its net profit growth.
• Market Position: Samsonite is the largest company in the global travel luggage sector, with only 10% market share, indicating significant growth potential.
• Valuation: The stock is trading at 18.5x 2014F P/E, which is not considered very cheap compared to peers like Tumi (25x 2014F P/E) and the average of 18.8x P/E.

Challenges

• China Sales Slowdown: Sales growth in China slowed to 5.3% YoY due to weak consumer sentiment and reduced government gifting spending.
• Currency Deflation: Local currency deflation could affect performance, as seen in Japan where sales growth was -2.8% YoY in US$ despite 18.6% growth in local currency.
• Market Conditions: The company's outlook is influenced by the recovering economy in the US and Europe, and a lower base in China.

Views on Outlook

• Guidance: Management expects low-teens growth for 2014 and potential margin expansion.
• Long-Term Growth: The company is expected to deliver sustainable double-digit growth due to its strong market position and effective brand integration.

Valuation and Investment Potential

• Price Catalysts: Potential growth in new brand acquisitions and sales updates could drive the stock price.
• Investor Appeal: The valuation is considered good for long-term investors, with solid fundamentals and strong growth potential.

Shareholding Structure

• Wellington Management Company: 9.40%
• Morgan Stanley: 6.96%
• FIL Limited: 5.99%
• T. Rowe Price Associates: 5.07%
• Free Float: 72.58%

Market Performance

• Hang Seng Index (HSI): 21,569 (down 0.1% YoY).
• H-share Index: 9,361 (up 0.2% YoY).
• China Composite Indices: Mixed performance with Shanghai Composite Index at 7,150 (down 1.7% YoY) and Shenzhen Composite Index at 1,094 (down 0.5% YoY).
• Asian Indices: Nikkei 225 increased by 0.4%, Korea KOSPI decreased by 0.1%, and Taiwan TWSE decreased by 0.5%.
• US/European Indices: DJIA down 0.7%, S&P 500 down 0.6%, NASDAQ down 0.6%, UK FTSE 100 down 0.5%, Germany DAX up 0.4%, and France CAC 40 down 0.1%.

Key Indicators

• Oil Prices: WTI oil at $100.4 per barrel (up 0.7%).
• Gold Prices: $1,340.1 per troy ounce (down 1.5%).
• Copper and Aluminum: No significant change in prices.
• CRB Index: 302.9 (up 0.1%).
• Baltic Dry Index: 1,570 (up 3.4%).
• Interest Rates: US Treasury yields (3m) at 0.05% (up 0.01%), (10y) at 2.77% (up 0.100%).
• HIBOR and LIBOR: HIBOR at 0.37% (down 0.001%), LIBOR at 0.23% (down 0.001%).

Earnings Forecast

Peer Comparison

Market Capitalization and Performance

• Market Cap (HK$ billion): 29.42
• Market Cap (US$ billion): 3.79
• Total Issued Shares (billion): 1.41
• Average 3-Month Turnover (HK$ million): 81.12
• Performance (1m): 10.0%
• Performance (3m): (0.4)%
• Performance (6m): 5.3%

Ratio Analysis

Conclusion

Samsonite International demonstrated robust growth in 2013, with strong sales and net profit increases across all regions and new brands. The company's solid fundamentals and potential for long-term growth make it an attractive investment. Despite challenges in China and currency deflation, the outlook for 2014 is positive, and the valuation is considered favorable for long-term investors.