Thanks for sharing the write up...is there any real evidence that dual listing will do anything for the multiple?...the only instances I've seen this work is relisting ie when the primary listing is moved (e.g. CRH / Ferguson)...there lots of examples of secondary ADR listings in US where the multiples remain the dumps vs US domestic listed peers (e.g. BTI).
Hey Alex, nice write up on Samsonite. I actually reach the opposite conclusion on Samsonite. I think the scale and branding of Samsonite is not very strong. Let’s compare it brand by brand. Tumi is positioned towards Rimowa, but Samsonite’s small 200mil marketing budget against just 1% of LVMH’s marketing budget is 4x Samsonite entire budget. And such marketing is concentrated on 1 brand (Rimowa) vs Samsonite’s 3 brand. Prices for Tumi has also reach closed to Rimowa in some cases, which is awkward in terms of positioning. Growth in terms of ASP moving forward will likely be cap.
On the opposite end, we have American tourister. The entire TAM of the luggage segment is dominate by unbranded players (75%), your Kirkland, your TJX, Amazon Basics. It is only a matter of time before tourister follows the trend of these private labels as they improve quality. This is why the remaining portfolio of Samsonite just doesn’t perform. I suspect the trend moving forward is the encroachment of these private labels.
The only unclear segment is Samsonite, with its mid point positioning. But look at history, pre-2016, growth was struggling. Has anything systematically changed? I don’t think so, that’s why it’s MSD growth propel the company to buy Tumi.
The only thing good for Samsonite is its relatively low P/E. But I feel it’s a value trap.
Hey Ryan, thank you very much for the thoughtful comments. My thoughts to your comments are:
a. The bottom line is I don't think Samsonite is one of the top business either. It's the undisputed leader in a niche market with a 100+ year history, trading at a depressed multiple but with potential catalysts.
b. On Rimowa vs. Tumi, consumer is not a winner-takes-all market. The market is big enough to sustain two brands. We have dozens of luxury brands in the world, right? The competition is far from neck-to-neck there. For your marketing expenses comp, LVMH's SG&A is 20x of Samsonite's. I don't know how much of LVMH's ads spending consists of Rimowa's. But I doubt it's only a very small part of it, as LVMH have so many bigger brands. I don't know if you have the exact number, but I don't think the difference is as big as you said. BTW, one expert said Tumi's marketing actually is quite smart by using Asian celeberities to target on that group of customers. You see, the consumer business is about finding your niche. I really don't believe the success of Rimowa would cause the death of Tumi. The sales of the two brands are 750m vs. 500m.
c. On AT, I agree that it faces more competition pressure. I feel the company is very careful of it and is not spending much on it. But they have streamlined its channel during COVID and the results were quite good. And during COVID, the smaller unbranded competitors suffered much more than Samsonite due to supply chain disruptions. So I guess it'd take some time until they come back.
d. On Samsonite, I don't know why you said its growth was struggling pre-2016. It grew by 10%, 10% and 6% from 2013-2015 on constant currency basis. Not stellar growth but still decent. The company was not in the best shape in the former CEO later years, as it got bigger and complacent. But the new CEO has cured some of the problems. That is the change.
In conclusion, there can be some recent headwinds on consumer spending, and I'm not happy with the speed of dual-listing. But once it's listed in US (hopefully), it should get a re-rate. I see quite some US consumer names in worse shape but at higher multiples. So I don't really see it as a value trap.
Really beautifully written bull thesis on Samsonite, and thank you for sharing my friend!
However, I don't think the description of the business moat is sufficient to convince me that this is a great company to own for the intermediate to long-term should the dual listing arbitragers failed their mission to close the value gap. The data point on your wife's brand awareness of the biz is comforting and can be a thesis point, but it falls short, in my view, in arguing why exactly is it special/differentiated. Suitcases serve the functionality of carrying personal items, so do they illustrate personal status when they are resting in a hotel room when you're in professional meetings? Do they illustrate personal taste or serve social functions when you're flying solo on an airplane? Can the design and make of these products be so advanced that you strongly prefer carrying one brand vs. another because of substantially lighter weight/ease of movement/great hand touch/etc? I simply do not get how such a product can be differentiated and how much of a role brand plays in sales and how much pricing power is embedded. And yes profitability and sales improved but is it completely due to operational improvements or can it also be due to a strong post-Covid recovery? Just want to point out that both their revenue and FCF for 2023 still fall short of what they achieved back in 2019, yet back then they traded at 15 HKD/share.
For SN, yes the special situation played out well, and huge congratulations! On the other hand, given SN has to do with the US real estate industry and anything associated with this industry last year surged like insane (even the home builders like Pulte Group and DR Horton, or cement producers like ROAD and CRH, all up 70%-110%), I am not sure how much is due to the special situation and how much is simply industrial tailwind. I did not think SN has a deep moat (like White Electronics, for instance) that's why I did not load it up, and I still do not think it does. Operational efficiency is a plus, but the business itself does not sound to be deeply moaty to me.
Anyhow, grateful for you to share this and overall I think it's particularly well articulated. Thanks & have a great weekend!
Thank you so much for the kind comment! Your concern on their moat is very ligit. I never think or try to intend to say that they are A/A+ type of business. I believe they are B/B+, good and better than most competitors. For these two, my thesis were not to own them forever as compounder, nor as Graham type of general undervalue. What I care about are the corporate actions, good business momentum, as well as they are very decent players in their industry but missed by most home country investors.
For Samonite's moats, it's a company with 100 years+ history and the only internationally recognized brand (those luxuory brands product line aside). It probably should have something special, right? For the value of its brand, my observation is people tend to prefer a trustworthy brand for durable goods. Obviously Samsonite can be trust as very good quality. Whether it's a brand to show good social status? I think it's a matter to whom. If you compare it to cars, it's more like owning an Audi in China- for most people it's a very good choice, but not as fancy as a Porsche. And I'm very curious how's the perception of luggage case brands in your country. But it's much better than auto industry because you don't have that many competitors. Another competitive advantage I didn't mention is its scale edge on supply chain. I've seen competitor say Samsonite has a 10-15% cost advantage over smaller peers. So the unbranded peers cannot make enough profit to invest in marketing or channel. It's not difficult to imagine this point. I read Samsonite has 50% of the retail stores in the industry.
On the comparion with 2019, 1) though revenue is not higher than 2019, the unit economics is much better. 2) in terms of OCF and FCF2023 is significantly better than any other years, but the multiple is much lower than those years. 3) could it be that 2019 was more attractive to invest? So here we have a half glass of water. Probably the key question would still be what kind of growth they can deliver in the next few years. If they can grow at double digit, I don't think it's fair to pair it with White Electronics like Whirlpool. That's an open-ended question. I haven't followed the company for long as an investor. But I know it as a consumer and my investor gut feeling is it's very depressed in HKSE and should get a higher multiple in a healthier market.
On SN, I don't have data to support it, yet perhaps it's not heavily correlated to home sales. People would buy new small appliances for their old homes if the products have new functions, but not likely buy a new AC or washing machine unless they are broken. The room for innovation is a key difference. If you listen to SN's Q4 results conference, you can feel they would have a lot of new products in 2024. So I'm confident they can deliver good growth this year without the blessing of a very strong housing market. But I have trimmed most of my positions on it as the valuation gap has mostly played out. On the other hand, the fwd adj. PE is not crazy so I still keep some of it.
Loved the write up and your writing style Alex! Succinct and straight to the point. None of that sell-side BS haha
Thx Alex - we featured your excellent article in our Weekly Newsletter --> https://278773.seu2.cleverreach.com/m/15570577
Thanks for sharing the write up...is there any real evidence that dual listing will do anything for the multiple?...the only instances I've seen this work is relisting ie when the primary listing is moved (e.g. CRH / Ferguson)...there lots of examples of secondary ADR listings in US where the multiples remain the dumps vs US domestic listed peers (e.g. BTI).
Hey Alex, nice write up on Samsonite. I actually reach the opposite conclusion on Samsonite. I think the scale and branding of Samsonite is not very strong. Let’s compare it brand by brand. Tumi is positioned towards Rimowa, but Samsonite’s small 200mil marketing budget against just 1% of LVMH’s marketing budget is 4x Samsonite entire budget. And such marketing is concentrated on 1 brand (Rimowa) vs Samsonite’s 3 brand. Prices for Tumi has also reach closed to Rimowa in some cases, which is awkward in terms of positioning. Growth in terms of ASP moving forward will likely be cap.
On the opposite end, we have American tourister. The entire TAM of the luggage segment is dominate by unbranded players (75%), your Kirkland, your TJX, Amazon Basics. It is only a matter of time before tourister follows the trend of these private labels as they improve quality. This is why the remaining portfolio of Samsonite just doesn’t perform. I suspect the trend moving forward is the encroachment of these private labels.
The only unclear segment is Samsonite, with its mid point positioning. But look at history, pre-2016, growth was struggling. Has anything systematically changed? I don’t think so, that’s why it’s MSD growth propel the company to buy Tumi.
The only thing good for Samsonite is its relatively low P/E. But I feel it’s a value trap.
Hey Ryan, thank you very much for the thoughtful comments. My thoughts to your comments are:
a. The bottom line is I don't think Samsonite is one of the top business either. It's the undisputed leader in a niche market with a 100+ year history, trading at a depressed multiple but with potential catalysts.
b. On Rimowa vs. Tumi, consumer is not a winner-takes-all market. The market is big enough to sustain two brands. We have dozens of luxury brands in the world, right? The competition is far from neck-to-neck there. For your marketing expenses comp, LVMH's SG&A is 20x of Samsonite's. I don't know how much of LVMH's ads spending consists of Rimowa's. But I doubt it's only a very small part of it, as LVMH have so many bigger brands. I don't know if you have the exact number, but I don't think the difference is as big as you said. BTW, one expert said Tumi's marketing actually is quite smart by using Asian celeberities to target on that group of customers. You see, the consumer business is about finding your niche. I really don't believe the success of Rimowa would cause the death of Tumi. The sales of the two brands are 750m vs. 500m.
c. On AT, I agree that it faces more competition pressure. I feel the company is very careful of it and is not spending much on it. But they have streamlined its channel during COVID and the results were quite good. And during COVID, the smaller unbranded competitors suffered much more than Samsonite due to supply chain disruptions. So I guess it'd take some time until they come back.
d. On Samsonite, I don't know why you said its growth was struggling pre-2016. It grew by 10%, 10% and 6% from 2013-2015 on constant currency basis. Not stellar growth but still decent. The company was not in the best shape in the former CEO later years, as it got bigger and complacent. But the new CEO has cured some of the problems. That is the change.
In conclusion, there can be some recent headwinds on consumer spending, and I'm not happy with the speed of dual-listing. But once it's listed in US (hopefully), it should get a re-rate. I see quite some US consumer names in worse shape but at higher multiples. So I don't really see it as a value trap.
Really beautifully written bull thesis on Samsonite, and thank you for sharing my friend!
However, I don't think the description of the business moat is sufficient to convince me that this is a great company to own for the intermediate to long-term should the dual listing arbitragers failed their mission to close the value gap. The data point on your wife's brand awareness of the biz is comforting and can be a thesis point, but it falls short, in my view, in arguing why exactly is it special/differentiated. Suitcases serve the functionality of carrying personal items, so do they illustrate personal status when they are resting in a hotel room when you're in professional meetings? Do they illustrate personal taste or serve social functions when you're flying solo on an airplane? Can the design and make of these products be so advanced that you strongly prefer carrying one brand vs. another because of substantially lighter weight/ease of movement/great hand touch/etc? I simply do not get how such a product can be differentiated and how much of a role brand plays in sales and how much pricing power is embedded. And yes profitability and sales improved but is it completely due to operational improvements or can it also be due to a strong post-Covid recovery? Just want to point out that both their revenue and FCF for 2023 still fall short of what they achieved back in 2019, yet back then they traded at 15 HKD/share.
For SN, yes the special situation played out well, and huge congratulations! On the other hand, given SN has to do with the US real estate industry and anything associated with this industry last year surged like insane (even the home builders like Pulte Group and DR Horton, or cement producers like ROAD and CRH, all up 70%-110%), I am not sure how much is due to the special situation and how much is simply industrial tailwind. I did not think SN has a deep moat (like White Electronics, for instance) that's why I did not load it up, and I still do not think it does. Operational efficiency is a plus, but the business itself does not sound to be deeply moaty to me.
Anyhow, grateful for you to share this and overall I think it's particularly well articulated. Thanks & have a great weekend!
Thank you so much for the kind comment! Your concern on their moat is very ligit. I never think or try to intend to say that they are A/A+ type of business. I believe they are B/B+, good and better than most competitors. For these two, my thesis were not to own them forever as compounder, nor as Graham type of general undervalue. What I care about are the corporate actions, good business momentum, as well as they are very decent players in their industry but missed by most home country investors.
For Samonite's moats, it's a company with 100 years+ history and the only internationally recognized brand (those luxuory brands product line aside). It probably should have something special, right? For the value of its brand, my observation is people tend to prefer a trustworthy brand for durable goods. Obviously Samsonite can be trust as very good quality. Whether it's a brand to show good social status? I think it's a matter to whom. If you compare it to cars, it's more like owning an Audi in China- for most people it's a very good choice, but not as fancy as a Porsche. And I'm very curious how's the perception of luggage case brands in your country. But it's much better than auto industry because you don't have that many competitors. Another competitive advantage I didn't mention is its scale edge on supply chain. I've seen competitor say Samsonite has a 10-15% cost advantage over smaller peers. So the unbranded peers cannot make enough profit to invest in marketing or channel. It's not difficult to imagine this point. I read Samsonite has 50% of the retail stores in the industry.
On the comparion with 2019, 1) though revenue is not higher than 2019, the unit economics is much better. 2) in terms of OCF and FCF2023 is significantly better than any other years, but the multiple is much lower than those years. 3) could it be that 2019 was more attractive to invest? So here we have a half glass of water. Probably the key question would still be what kind of growth they can deliver in the next few years. If they can grow at double digit, I don't think it's fair to pair it with White Electronics like Whirlpool. That's an open-ended question. I haven't followed the company for long as an investor. But I know it as a consumer and my investor gut feeling is it's very depressed in HKSE and should get a higher multiple in a healthier market.
On SN, I don't have data to support it, yet perhaps it's not heavily correlated to home sales. People would buy new small appliances for their old homes if the products have new functions, but not likely buy a new AC or washing machine unless they are broken. The room for innovation is a key difference. If you listen to SN's Q4 results conference, you can feel they would have a lot of new products in 2024. So I'm confident they can deliver good growth this year without the blessing of a very strong housing market. But I have trimmed most of my positions on it as the valuation gap has mostly played out. On the other hand, the fwd adj. PE is not crazy so I still keep some of it.
Kindly let me know your thoughts. Many thanks!
I linked to this piece in my Monday Emerging Market Links post: https://emergingmarketskeptic.substack.com/p/emerging-markets-week-march-25-2024
CMBI research has done some recent free research reports about Samsonite (see https://emergingmarketskeptic.substack.com/?sort=search&search=Samsonite ) plus Acid Investments had this piece "Unpacking Samsonite (HKG:1910)" from earlier this month: https://acidinvestments.substack.com/p/the-curious-case-of-samsonite-hkg1910
Thank you so much!
It’s interesting that the OTC version even outperformed the 1910 HK lol.
Lol. Watch out for the bang on OTC today or tonight.