Samsonite leverer stærkt Q2 men regner med at tempoet vil aftage

I kølvandet på angrebet fra short-sælgeren Blue Orca er Samsonites aktiekurs faldet tilbage, men med fire stjerner fremstår selskabet undervurderet sammenlignet med vores fair value-estimat på 40 HKD, der indikerer en upside på over 30 procent.

Af Lorraine Tan CFA, Morningstar Aktieanalytiker.

With this being the first release of results following shortseller Blue Orca's report, we believe Samsonite's decent all-round second-quarter performance, with operating profit up 29% year over year, should appease most investor concerns although CEO Kyle Gendreau's cautious optimism points to some headwinds in the third quarter from trade war uncertainty. Sales growth is running ahead of our full-year forecast but the firm expects second-half pace to slow.

We make only minimal adjustments and our fair value estimate is unchanged at HKD 40. We believe Samsonite remains attractive at the current level especially as the firm aims to improve its free cash flow through better operating leverage and inventory management. One negative we'd watch for is the weaker growth for the Samsonite brand in Asia but this has been more than offset by strength in other markets and its other main brands. Growth figures indicate market share gains and we keep our narrow moat rating.

The good news is that American Tourister and Tumi are seeing strong growth with the former's rebranding success and the latter's expansion into Asia and Europe. In addition, rising direct-to-consumer sales from Tumi's growth and the group's own e-commerce sales, which enjoys higher gross margins (excluding eBags), has helped gross margin expand 360 basis points from a year ago and 100 basis points from last quarter. Rising input costs and higher import tariffs on materials in the U.S. market may limit margin expansion in the second half. We note SGA expenses eased as a portion of sales in the second quarter but should normalize at the higher level for the full year. Operating margins may come in 20 basis points short of our 50 basis points improvement for the full year based on management guidance but we don’t anticipate shortfall to our earnings forecast given the stronger top line growth. A USD 53.3 million one-off deferred tax charge lowered income but is a noncash flow item and already reflected.

The company did note some swings in certain country sales particularly Korea and Germany but believes this largely reflects tourism shifts. One disappointment is the slower first-half growth of 3.9% year over year for the Samsonite brand itself in Asia, which is even below the North American pace of 4% even though the latter is a mature market. Although this is masked by the strong pick-up in sales by its other main brands, it does imply some pressure. CEO Gendreau mentioned a potential plan to shift Samsonite brand pricing higher to close some gap to Tumi's price range. This implies a potential tweak to the product offering. We’d be keen to see the group look into ways to ensure the Samsonite brand maintains its market share globally. 

American Tourister has now enjoyed six quarters of growth following its brand revitalization with this summer's marketing campaign using soccer star Cristiano Ronaldo driving exceptionally strong sales growth of 29% year over year for the first half (up 49.5% in Europe). The pace is anticipated to ease as the campaign impact wears off but growth should still be healthy in the high teens in local currency terms. 

Tumi saw an exceptional performance in Asia with sales up 39% year over year in the first half and gross margin up 1,100 basis points to 73.8%. Margin expansion comes from a full-half impact of bringing full distribution in-house in Asia with the agency acquisitions last year as well as sourcing synergies. The brand's North American and European sales growth were also promising at 8.2% and 9.2% respectively, and with gross margins also up strongly by 370 and 800 basis points. Overall EBITDA margin was up 400 basis points for Tumi. The performance means Tumi is well on track to meet our full-year sales growth assumption of 13% year over year in 2018. And while we think growth will slow in Asia going forward, management expects Tumi's growth to strengthen in Europe. 

With the strength of these three core brands, Samsonite, Tumi, and American Tourister collectively make up over 83% of group sales and drives the bulk of growth and profit. Kamiliant, which is solely for the Asian market, also saw strong first-half sales of 58% but the impact to group performance is limited at less than 2%. Other brands saw growth below that of its main brands. We think that there is still room for Samsonite to shutter some of these smaller brands but as there is no significant impact either way, the group appears comfortable in sustaining the current portfolio. The acquisition of online retailer eBags may make it easier to squeeze out sales of these other brands and notably High Sierra is seeing some stability after closing down its apparel line to refocus on luggage. 

We forecast margin expansion for Samsonite and this is largely driven by cost synergies at Tumi. However, we also expect eBags to contribute to returns in due course. Management feels that this will become more meaningful when group brands reach around 60% of sales. Our forecast also assumes that SGA spending will ease as growth slows to our midcycle forecast. This is within the group's plan to focus on improving its operating leverage. 

The view is that there is room to improve working capital efficiency with inventory turnover at 140 days in the first half. This is in line with the 139 days seen in 2017 and our forecast. However, management would like to bring this down to around 120-130 days which they feel is more optimal. We are encouraged by this focus on cash flow management, which was not previously highlighted, and this provides us with more confidence in our free cash flow expectations for the group and to our fair value estimate.

Bulls say:

  • Premium-positioned Tumi is a good strategic fit and will drive faster sales and margin growth for Samsonite.
  • Margins will rise because the proportion of sales from the higher-margin direct-to-consumer channel will rise to 50% from 30%-35% in the next few years.
  • Samsonite’s multibrand, multicategory strategy allows it to diversify risks and remain agile.

 

Bears say:

  • It will take more time for the Tumi brand to find the same loyalty globally as it has in North America, so increased market spending will eat into margins and keep returns subdued.
  • Discounting, especially for its American Tourister brand, will continue to limit revenue growth.
  • Department stores and other retail channels continue to scale back branches, making it difficult for Samsonite to showcase and sell the broad range of its product line 


Alle estimater og vurderinger er per 29. august 2018 af Lorraine Tan, CFA, Morningstar Equity Analyst.

Lorraine Tan har ingen positioner i de nævnte værdipapirer.

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Samsonite International SA22,10 HKD-5,56

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