Samsonite

HK$5.82 - BUY

Dylan Chu Bargain luggage

[email protected] An enduring franchisee at irrational valuation; Conviction BUY
+852 2600 8725
We see value emerge in Samsonite amid a quasi-indiscriminate sell-off of global
Valerie Zhou travel exposures. Unlike some other indeed vulnerable names, Samsonite had
+852 2600 7782 much longer product shelf life, a solid balance sheet, ample liquidity, and US$2bn
net assets without much buyback historically. The current valuation appears
Jisheng Liu unreasonable as a PE investor can recover investments with only FCFs in 7-9 years,
+852 2600 8017 at zero terminal value. While we revised down our earnings forecasts and target
multiple, our target price declining from HK$18.35 to HK$9.84 still implies c.70%
upside. Conviction BUY.
19 March 2020
FY19 review: key targets delivered
Hong Kong Although the FY19 result itself was broadly in-line and largely a non-event following
Consumer the global Covid-19 outbreak, it was in fact commendable that Samsonite navigated
an extremely tough macro and trade environment and delivered on a number of key
Reuters 1910.HK initiatives including: 1) reducing loss making legacy retail footprint; 2) rapid shift in
Bloomberg 1910 HK
US sourcing; 3) further inventory turnover efficiency and cashflow strength; and
Priced on 19 March 2020 4) further debt repayment and balance sheet deleveraging.
HK HSI @ 21,709.1
12M hi/lo HK$26.00/5.82 FY20 outlook: base case breakeven
12M price target HK$9.84 We built in a c.6-month Covid-19 impact scenario in which global travel restrictions
±% potential +69% and consumer travel caution will last for about half of 2020, which may see sales
Shares in issue 1,431.0m
decline by c.30% YoY. Under such a base, we expect adjusted Ebitda to decline
Free float (est.) 68.8% c.60% YoY and a net loss outcome close to breakeven, coupled with some
Market cap US$1.1bn
deterioration in but still positive free cashflow profile.
3M ADV US$12.1m Valuation: unreasonably low
Foreign s'holding 100.0% On all key valuation metrics Samsonite is trading at historic lows, which appeared to
Major shareholders imply imminent existential risks that were not likely over the foreseeable 24 months,
Schroders 8.3% even amid a prolonged and repeated Covid-19 impact, in our view. If and when
Citigroup 6.0% business does normalise, Samsonite can comfortably generate US$250-350m free
cashflow against a current enterprise value of c.US2.4bn.

Clearance sales price; Conviction BUY

Blended ESG Score (%)* While it is possible to break certain covenants, dividends and investments were
Overall 75.2 already very conservatively managed, and any liquidity or insolvency risks appear
Country average 67.5
GEM sector average 65.2
unlikely in the foreseeable future. We lower our 20/21CL earnings forecasts by
*Click to visit company page on clsa.com for details 103%/25%, and our target multiple from 15x 21CL PE to 10x 21CL PE in view of
Stock performance (%) global travel uncertainties and rising pressure on balance sheet. Our target price
falls from HK$18.35 to HK$9.84, and we genuinely see upside. Conviction BUY.
1M 3M 12M
Absolute (63.5) (67.3) (76.5) Financials
Relative (53.5) (58.2) (68.1) Year to 31 December 18A 19A 20CL 21CL 22CL
Abs (US$) (63.5) (67.2) (76.3) Revenue (US$m) 3,797 3,639 2,548 3,821 4,057
Rev forecast change (%) - - (33.0) (5.5) -
Net profit (US$m) 224 133 (6) 175 225
NP forecast change (%) - - (103.2) (24.8) -
EPS (US$) 0.20 0.15 (0.01) 0.12 0.15
CL/consensus (12) (EPS%) - - (6) 69 -
EPS growth (% YoY) 6.3 (22.8) (106.0) nm 29.7
PE (x) 3.8 4.9 nm 6.3 4.9
Dividend yield (%) 11.8 0.0 0.0 4.9 8.4
ROE (%) 12.0 6.8 (0.3) 8.6 10.2
Net debt/equity (%) 73.5 95.2 91.4 73.9 60.7
Source: Bloomberg Source: www.clsa.com

CLSA and CL Securities Taiwan Co., Ltd. (“CLST”) do and seek to do business with companies covered in its research reports. As such,
investors should be aware that there may be conflicts of interest which could affect the objectivity of the report. Investors should consider
this report as only a single factor in making their investment decisions. For important disclosures please refer to page 10.
 
 
 Bargain luggage Samsonite - BUY

Financials at a glance
Year to 31 December 2018A 2019A 2020CL (% YoY) 2021CL 2022CL

Profit & Loss (US$m)

Revenue 3,797 3,639 2,548 (30) 3,821 4,057
Cogs (ex-D&A) (1,531) (1,510) (1,042) (1,560) (1,639)
Gross Profit (ex-D&A) 2,266 2,129 1,506 (29.3) 2,261 2,418
SG&A and other expenses (1,662) (1,734) (1,302) (1,798) (1,883)
Op Ebitda 604 395 204 (48.3) 464 535
Depreciation/amortisation (121) (112) (116) (114) (110)
Op Ebit 482 283 89 (68.6) 350 425
Net interest inc/(exp) (156) (98) (77) (83) (89)
Other non-Op items - 0 - - -
Profit before tax 326 185 12 (93.4) 267 336
Taxation (82) (32) (3) (69) (87)
Profit after tax 244 153 9 (94.1) 197 249
Minority interest (21) (21) (15) (22) (23)
Net profit 224 133 (6) 175 225
Adjusted profit 279 216 (13) 168 218
Cashflow (US$m) 2018A 2019A 2020CL (% YoY) 2021CL 2022CL
Operating profit 482 283 89 (68.6) 350 425
Depreciation/amortisation 121 112 116 3 114 110
Working capital changes (122) 34 (26) (48) (53)
Other items (174) 147 (80) (152) (177)
Net operating cashflow 307 576 98 (82.9) 264 306
Capital expenditure (101) (55) (31) (57) (81)
Free cashflow 207 521 68 (87) 206 225
M&A/Others (17) (18) 0 0 0
Net investing cashflow (117) (73) (31) (57) (81)
Increase in loans (30) (28) (167) (100) (100)
Dividends (110) (125) 0 0 (53)
Net equity raised/other 32 (313) 0 0 -
Net financing cashflow (107) (465) (167) (100) (153)
Incr/(decr) in net cash 83 38 (99) 106 72
Exch rate movements 1 (3) 0 0 0
Balance sheet (US$m) 2018A 2019A 2020CL (% YoY) 2021CL 2022CL
Cash & equivalents 428 463 363 (21.5) 470 542
Accounts receivable 421 396 349 (11.8) 411 430
Other current assets 769 685 599 (12.6) 719 748
Fixed assets 311 267 218 (18.5) 199 210
Investments - - - - -
Intangible assets 3,111 3,030 2,995 (1.2) 2,957 2,916
Other non-current assets 102 701 771 10 848 933
Total assets 5,142 5,541 5,294 (4.5) 5,603 5,780
Short-term debt 53 199 81 (59.3) 81 81
Accounts payable 699 676 548 (18.9) 717 751
Other current liabs 185 176 190 7.9 205 222
Long-term debt/CBs 1,839 2,169 2,120 (2.3) 2,020 1,920
Provisions/other LT liabs 376 320 345 7.7 373 403
Shareholder funds 1,948 1,951 1,945 (0.3) 2,121 2,293
Minorities/other equity 43 51 65 29 87 110
Total liabs & equity 5,142 5,542 5,294 (4.5) 5,603 5,780
Ratio analysis 2018A 2019A 2020CL (% YoY) 2021CL 2022CL
Revenue growth (% YoY) 8.8 (4.2) (30.0) 49.9 6.2
Ebitda margin (%) 15.9 10.9 8.0 12.1 13.2
Ebit margin (%) 12.7 7.8 3.5 9.1 10.5
Net profit growth (%) (33.1) (40.7) (104.2) nm 28.4
Op cashflow growth (% YoY) (10.0) 87.4 (82.9) 167.6 16.1
Capex/sales (%) 2.6 1.5 1.2 1.5 2.0
Net debt/equity (%) 73.5 95.2 91.4 73.9 60.7
Net debt/Ebitda (x) 2.4 4.8 9.0 3.5 2.7
ROE (%) 12.0 6.8 (0.3) 8.6 10.2
ROIC (%) 9.6 5.8 1.6 6.2 7.4
Source: www.clsa.com

Find CLSA research on Bloomberg, Thomson Reuters, FactSet and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com

19 March 2020 [email protected] 2

 
 
 Bargain luggage Samsonite - BUY

A firm capital structure

Samsonite features a solid capital structure as of December 2019 (summarised
below). In addition, on 16 March 2020, Samsonite entered into an amendment with
certain lenders that provides for: 1) an amended US$800m senior secured term loan
A facility; and 2) an amended US$850.0m revolving credit facility. The amendments
extended the tenor of the two facilities by c.2 years, reduced the interest rate
margin by 12.5bp, reset the principal amortization schedule, and provided
additional US$200m liquidity.

Figure 1

Samsonite capital structure summary

31 Dec 2019
Term Loan A Facility 797.0
Term Loan B Facility 554.9
Total Term Loan Facility 1,351.8
Senior Notes 392.4
Other long-term obligations 23.7
Total loans and borrowings 1,768.0
Non-current loans and borrowings 1,730.3
Current loans and borrowings 37.7
Equity 2,001.5
Cash and cash equivalents 462.6
Total Net Cash (Debt) (1,305.3)
Source: Company data, CLSA

Figure 2 Figure 3

Samsonite debt maturity profile Book value as % of market cap – global travel comparisons

Source: Company data, CLSA Source: Company data, CLSA

We also note the interest rate environment may turn more favourable for
Samsonite, and we expect Samsonite to stay free cashflow positive even in 2020.

19 March 2020 [email protected] 3

 
 
 Bargain luggage Samsonite - BUY

Figure 4 Figure 5

LIBOR trend Free cashflow

Source: Company data, CLSA Source: Company data, CLSA

FY20 base case

1Q20TD sales were trending down at around a 25-30% YoY rate with a marked
deterioration since March; as of mid-March, 90% of stores in China resumed
opening. We built in a c.6 month Covid-19 impact scenario in which global travel
restrictions and consumer travel caution will last for about half of 2020, which may
see sales decline by c.30% YoY. Under such a base, we expect adjusted Ebitda to
decline c.60% YoY and a net loss outcome close to breakeven, coupled with some
deterioration in but still positive free cash flow profile. We built such a base case
and reflected the lack of future visibility in a much lower than historical target
multiple.

Figure 6

Samsonite key P&L forecast summary

P&L 2018A 2019A 2020CL 2021CL 2022CL
Net sales 3,797.0 3,638.9 2,548.3 3,821.0 4,057.1
Cost of sales (1,652.4) (1,622.0) (1,157.7) (1,673.9) (1,749.0)
Gross profit 2,144.6 2,016.9 1,390.6 2,147.1 2,308.1
Distribution expenses (1,211.7) (1,203.2) (932.9) (1,247.1) (1,306.9)
Marketing expenses (221.3) (189.5) (51.0) (195.2) (205.2)
General and administrative expenses (233.0) (229.6) (200.8) (232.1) (241.7)
Other expenses 3.7 (111.6) (117.2) (123.0) (129.2)
Operating profit/(loss) 482.3 283.0 88.8 349.6 425.1
Adjusted Ebitda 592.3 492.2 201.0 473.8 548.4
Margin (%) 15.6 13.5 7.9 12.4 13.5
Finance income 1.0 3.2 1.8 2.3 2.0
Finance costs (157.4) (101.3) (78.4) (85.4) (91.3)
Finance income and costs (156.4) (98.1) (76.6) (83.0) (89.3)
Profit/(loss) before income tax 325.9 184.9 12.2 266.6 335.8
Income tax (expense)/benefit (81.8) (31.5) (3.2) (69.3) (87.3)
Effective tax rate (%) 25.1 17.0 26.0 26.0 26.0
Profit/(loss) for the year 244.1 153.4 9.0 197.3 248.5
Minority (20.5) (20.9) (14.6) (21.9) (23.3)
Net profit 223.6 132.5 (5.6) 175.3 225.2
Source: Company data, CLSA

19 March 2020 [email protected] 4

 
 
 Bargain luggage Samsonite - BUY

FY19 review
FY19 and 4Q19 were largely non-events. No dividend was declared, which was not
entirely surprising. Importantly, Samsonite was preparing for prolonged global
travel uncertainties with additional refinancings secured. As of December 2019,
Samsonite had a net debt position of US$1.3bn (2.6x the trailing 2019 adjusted
Ebitda) and liquid resources over US$1.2bn. While it is possible for Samsonite to
break certain covenants, insolvency risks appeared limited.

FY19 financial highlights

q Net sales declined by 4.2% YoY to US$3,638m in 2019 (19CL: US$3,653m,
consensus: US$3,648m) broadly in-line.

q Gross profit margin declined by 1.1ppt YoY to 55.4% mainly due to tariff hikes.

q Operating profit declined by 39.4% YoY to US$283.0m.

q Adjusted Ebitda declined by 19.8% YoY to US$492.2m (19CL: US$495m).

Adjusted Ebitda margin was 13.5%.

q Adjusted net income declined by 26.7% YoY to reach US$215.9m (19CL:

US$223m, consensus: US$214m); adjusted NPM was 5.9%.

q Working capital: Inventory turnover of 132 days (2018: 138 days); Receivable
turnover of 40 days (2018: 40 days). Payable turnover of 113 days (2018: 116
days). OCF increased 32% YoY to US$406m.

Outlook
q Guidance: No guidance was given due to Covid-19 uncertainties, and
impairments are possible.

q Sales: On a constant currency basis, 2M20 group net sales decreased by

11.2% YoY, with Asia down 20.2% YoY, China down 33.7% YoY, and Hong
Kong down 57.7% YoY.

q Supply chain: Samsonite had experienced 4-5 weeks of supply chain

disruptions in China which had limited impact on business given sales decline.

q Covenants: Under the current set of covenants, net leverage ratio (2019: 2.6x)
cannot exceed 5.25x in 2020 and cash interest coverage ratio cannot be lower
than 3x.

q 2020 refinancing: On 16 March 2020, Samsonite entered an amendment with

certain lenders that provides for: 1) an amended US$800m senior secured term
loan A facility; and 2) an amended US$850.0m revolving credit facility. The
amendments extended the tenor of the two facilities by c.2 years, reduced the
interest rate margin by 12.5bp, reset the principal amortization schedule, and
provided additional US$200m liquidity.

19 March 2020 [email protected] 5

 
 
 Bargain luggage Samsonite - BUY

Earnings revision and valuation

Given the global outbreak of Covid-19 and increasing travel restrictions, we
lowered our 20/21CL earnings forecasts by 103%/25%. The earnings downgrades
were driven primarily by more conservative sales estimates and associated
operating deleverage. Implicit in our current forecast is a scenario of a c.6-month
global travel impact with sequential recovery expected in 2021. In view of global
travel uncertainties and rising pressure on balance sheet, we revised down our
target multiple from 15x 21CL PE to 10x 21CL PE. Our target price falls from
HK$18.35 to HK$9.84. Reiterate BUY.

Figure 7 Figure 8

Samsonite Ev/sales Samsonite P/B

Source: FactSet, CLSA Source: FactSet, CLSA

Valuation details
We base our target price on 10x 21CL adjusted PE.

Investment risks
A global macroeconomic slowdown will impact tourist flows, which is a key driver
of luggage demand. However, it is worth emphasising that people continue to travel
during times of uncertainty, but are likely to spend less on holidays, perhaps
travelling closer to home. Negative events also include terrorist attacks, civil unrest,
disease, and natural disasters.

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 Bargain luggage Samsonite - BUY

Detailed financials
Profit & Loss (US$m)
Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Revenue 2,810 3,491 3,797 3,639 2,548 3,821 4,057
Cogs (ex-D&A) (1,200) (1,413) (1,531) (1,510) (1,042) (1,560) (1,639)
Gross Profit (ex-D&A) 1,610 2,078 2,266 2,129 1,506 2,261 2,418
Research & development costs - - - - - - -
Selling & marketing expenses (962) (1,279) (1,433) (1,393) (984) (1,442) (1,512)
Other SG&A (178) (240) (233) (230) (201) (232) (242)
Other Op Expenses ex-D&A (50) (18) 4 (112) (117) (123) (129)
Op Ebitda 420 542 604 395 204 464 535
Depreciation/amortisation (89) (118) (121) (112) (116) (114) (110)
Op Ebit 331 424 482 283 89 350 425
Interest income 1 1 1 3 2 2 2
Interest expense (60) (94) (157) (101) (78) (85) (91)
Net interest inc/(exp) (59) (93) (156) (98) (77) (83) (89)
Associates/investments - - - - - - -
Forex/other income - - - - - - -
Asset sales/other cash items - - - - - - -
Provisions/other non-cash items - - - - - - -
Asset revaluation/Exceptional items - - - - - - -
Profit before tax 273 331 326 185 12 267 336
Taxation 2 24 (82) (32) (3) (69) (87)
Profit after tax 275 355 244 153 9 197 249
Preference dividends - - - - - - -
Profit for period 275 355 244 153 9 197 249
Minority interest (19) (21) (21) (21) (15) (22) (23)
Net profit 256 334 224 133 (6) 175 225
Extraordinaries/others 0 0 0 0 0 0 0
Profit avail to ordinary shares 256 334 224 133 (6) 175 225
Dividends (97) (110) (125) 0 0 (53) (90)
Retained profit 159 224 99 133 (6) 123 135
Adjusted profit 258 261 279 216 (13) 168 218
EPS (US$) 0.2 0.2 0.2 0.2 0.0 0.1 0.2
Adj EPS [pre excep] (US$) 0.2 0.2 0.2 0.2 0.0 0.1 0.2
Core EPS (US$) 0.2 0.2 0.2 0.2 0.0 0.1 0.2
DPS (US$) 0.1 0.1 0.1 0.0 0.0 0.0 0.1

Profit & loss ratios

Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Growth (%)
Revenue growth (% YoY) 15.5 24.2 8.8 (4.2) (30.0) 49.9 6.2
Ebitda growth (% YoY) 14.1 28.9 11.4 (34.5) (48.3) 126.9 15.4
Ebit growth (% YoY) 7.2 28.0 13.8 (41.3) (68.6) 293.7 21.6
Net profit growth (%) 29.4 30.7 (33.1) (40.7) (104.2) nm 28.4
EPS growth (% YoY) 18.8 0.6 6.3 (22.8) (106.0) nm 29.7
Adj EPS growth (% YoY) 18.8 0.6 6.3 (22.8) (106.0) nm 29.7
DPS growth (% YoY) 4.2 12.9 12.8 (100.0) - - 71.2
Core EPS growth (% YoY) 18.8 0.6 6.3 (22.8) (106.0) nm 29.7
Margins (%)
Ebitda margin (%) 15.0 15.5 15.9 10.9 8.0 12.1 13.2
Ebit margin (%) 11.8 12.1 12.7 7.8 3.5 9.1 10.5
Net profit margin (%) 9.1 9.6 5.9 3.6 (0.2) 4.6 5.5
Core profit margin 9.2 7.5 7.4 5.9 (0.5) 4.4 5.4
Op cashflow margin 9.3 9.8 8.1 15.8 3.9 6.9 7.5
Returns (%)
ROE (%) 18.1 20.5 12.0 6.8 (0.3) 8.6 10.2
ROA (%) 9.7 9.4 7.1 4.4 1.2 4.7 5.5
ROIC (%) 13.3 12.5 9.6 5.8 1.6 6.2 7.4
ROCE (%) 15.3 13.4 14.1 7.6 2.3 9.0 10.9
Other key ratios (%)
Effective tax rate (%) (0.8) (7.3) 25.1 17.0 26.0 26.0 26.0
Ebitda/net int exp (x) 7.2 5.8 3.9 4.0 2.7 5.6 6.0
Exceptional or extraord. inc/PBT (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Dividend payout (%) 37.6 42.2 44.8 0.0 - 31.3 41.3
Source: www.clsa.com

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 Bargain luggage Samsonite - BUY

Balance sheet (US$m)

Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Cash & equivalents 369 344 428 463 363 470 542
Accounts receivable 358 411 421 396 349 411 430
Inventories 421 583 623 587 492 602 619
Other current assets 143 156 147 97 107 118 130
Current assets 1,290 1,495 1,618 1,543 1,311 1,599 1,720
Fixed assets 282 308 311 267 218 199 210
Investments - - - - - - -
Goodwill 1,239 1,343 1,340 1,339 1,339 1,339 1,339
Other intangible assets 1,733 1,793 1,771 1,691 1,656 1,618 1,577
Other non-current assets 105 131 102 701 771 848 933
Total assets 4,650 5,070 5,142 5,541 5,294 5,603 5,780
Short term loans/OD 24 84 53 199 81 81 81
Accounts payable 534 737 699 676 548 717 751
Accrued expenses - - - - - - -
Taxes payable 94 98 75 54 60 66 72
Other current liabs 124 164 110 122 130 140 150
Current liabilities 776 1,083 936 1,051 819 1,003 1,054
Long-term debt/leases/other 1,806 1,744 1,839 2,169 2,120 2,020 1,920
Convertible bonds - - - - - - -
Provisions/other LT liabs 557 411 376 320 345 373 403
Total liabilities 3,139 3,238 3,151 3,540 3,284 3,395 3,376
Share capital 14 14 14 14 14 14 14
Retained earnings 1,453 1,777 1,934 1,937 1,931 2,106 2,279
Reserves/others 0 0 0 0 - 0 -
Shareholder funds 1,467 1,791 1,948 1,951 1,945 2,121 2,293
Minorities/other equity 44 41 43 51 65 87 110
Total equity 1,511 1,832 1,991 2,002 2,011 2,208 2,404
Total liabs & equity 4,650 5,070 5,142 5,542 5,294 5,603 5,780
Total debt 1,830 1,828 1,891 2,368 2,200 2,100 2,000
Net debt 1,461 1,483 1,464 1,905 1,837 1,631 1,459
Adjusted EV 2,563 2,583 2,567 3,018 2,966 2,782 2,637
BVPS (US$) 1.0 1.3 1.4 1.4 1.4 1.5 1.6

Balance sheet ratios

Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Key ratios
Current ratio (x) 1.7 1.4 1.7 1.5 1.6 1.6 1.6
Growth in total assets (% YoY) 109.8 9.1 1.4 7.8 (4.5) 5.8 3.2
Growth in capital employed (% YoY) 127.3 11.3 4.1 13.1 (1.4) (0.2) 0.7
Net debt to operating cashflow (x) 5.6 4.3 4.8 3.3 18.7 6.2 4.8
Gross debt to operating cashflow (x) 7.0 5.4 6.2 4.1 22.3 8.0 6.5
Gross debt to Ebitda (x) 4.4 3.4 3.1 6.0 10.8 4.5 3.7
Net debt/Ebitda (x) 3.5 2.7 2.4 4.8 9.0 3.5 2.7
Gearing
Net debt/equity (%) 96.7 80.9 73.5 95.2 91.4 73.9 60.7
Gross debt/equity (%) 121.1 99.7 95.0 118.3 109.4 95.1 83.2
Interest cover (x) 5.6 4.5 3.1 2.8 1.2 4.1 4.7
Debt Cover (x) 0.1 0.2 0.2 0.2 0.0 0.1 0.2
Working capital analysis
Inventory days 109.0 119.7 133.2 136.1 170.1 119.2 127.3
Debtor days 41.6 40.2 40.0 41.0 53.4 36.3 37.8
Creditor days 138.1 151.5 158.6 154.7 192.9 137.9 153.1
Working capital/Sales (%) 6.1 4.4 8.1 6.3 8.2 5.4 5.1
Capital employed analysis
Sales/Capital employed (%) 93.7 104.5 109.2 92.6 65.8 98.8 104.1
EV/Capital employed (%) 85.4 77.3 73.8 76.8 76.5 71.9 67.7
Working capital/Capital employed (%) 5.7 4.5 8.8 5.8 5.4 5.4 5.3
Fixed capital/Capital employed (%) 9.4 9.2 8.9 6.8 5.6 5.1 5.4
Other ratios (%)
EV/OCF (x) 9.8 7.6 8.4 5.2 30.1 10.6 8.6
EV/FCF (x) 13.4 10.5 12.4 5.8 43.7 13.5 11.7
EV/Sales (x) 0.9 0.7 0.7 0.8 1.2 0.7 0.6
Capex/depreciation (%) 104.2 111.2 117.4 69.2 38.2 75.2 116.6
Source: www.clsa.com

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 Bargain luggage Samsonite - BUY

Cashflow (US$m)
Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Operating profit 331 424 482 283 89 350 425
Operating adjustments - - - - - - -
Depreciation/amortisation 89 118 121 112 116 114 110
Working capital changes (38) (21) (122) 34 (26) (48) (53)
Interest paid / other financial expenses (36) (66) (63) (91) 0 0 0
Tax paid (75) (120) (104) (63) 0 0 0
Other non-cash operating items (10) 6 (6) 302 (80) (152) (177)
Net operating cashflow 261 341 307 576 98 264 306
Capital expenditure (70) (95) (101) (55) (31) (57) (81)
Free cashflow 191 247 207 521 68 206 225
Acq/inv/disposals (1,690) (183) (17) (18) - - -
Int, invt & associate div - - - - - - -
Net investing cashflow (1,759) (277) (117) (73) (31) (57) (81)
Increase in loans (45) 51 (30) (28) (167) (100) (100)
Dividends (93) (97) (110) (125) 0 0 (53)
Net equity raised/others 1,836 (66) 32 (313) 0 0 -
Net financing cashflow 1,698 (113) (107) (465) (167) (100) (153)
Incr/(decr) in net cash 199 (49) 83 38 (99) 106 72
Exch rate movements (12) 25 1 (3) 0 0 0
Opening cash 181 369 344 428 463 363 470
Closing cash 369 344 428 463 363 470 542
OCF PS (US$) 0.2 0.2 0.2 0.4 0.1 0.2 0.2
FCF PS (US$) 0.1 0.2 0.1 0.4 0.0 0.1 0.2

Cashflow ratio analysis

Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Growth (%)
Op cashflow growth (% YoY) 0.7 30.9 (10.0) 87.4 (82.9) 167.6 16.1
FCF growth (% YoY) 0.3 29.1 (16.2) 151.8 (87.0) 203.7 9.0
Capex growth (%) 1.6 36.0 6.3 (44.9) (44.8) 87.4 41.6
Other key ratios (%)
Capex/sales (%) 2.5 2.7 2.6 1.5 1.2 1.5 2.0
Capex/op cashflow (%) 26.7 27.7 32.7 9.6 31.0 21.7 26.5
Operating cashflow payout ratio (%) 37.2 32.2 40.7 0.0 0.0 20.0 29.4
Cashflow payout ratio (%) 37.2 32.2 40.7 0.0 0.0 20.0 29.4
Free cashflow payout ratio (%) 50.7 44.6 60.4 0.0 0.0 25.5 40.1

DuPont analysis
Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Ebit margin (%) 11.8 12.1 12.7 7.8 3.5 9.1 10.5
Asset turnover (x) 0.8 0.7 0.7 0.7 0.5 0.7 0.7
Interest burden (x) 0.8 0.8 0.7 0.7 0.1 0.8 0.8
Tax burden (x) 1.0 1.1 0.7 0.8 0.7 0.7 0.7
Return on assets (%) 9.7 9.4 7.1 4.4 1.2 4.7 5.5
Leverage (x) 2.4 2.9 2.7 2.7 2.7 2.6 2.5
ROE (%) 18.9 21.3 12.8 7.7 0.4 9.4 10.8

EVA® analysis
Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Ebit adj for tax 334 455 361 235 66 259 315
Average invested capital 2,508 3,628 3,779 4,028 4,210 4,202 4,238
ROIC (%) 13.3 12.5 9.6 5.8 1.6 6.2 7.4
Cost of equity (%) 8.5 8.5 8.5 8.5 8.5 8.5 8.5
Cost of debt (adj for tax) 3.9 4.1 2.9 3.2 2.8 2.8 2.8
Weighted average cost of capital (%) 8.0 8.1 7.9 8.0 7.9 7.9 7.9
EVA/IC (%) 5.3 4.5 1.6 (2.1) (6.4) (1.8) (0.5)
EVA (US$m) 132 162 61 (86) (268) (75) (22)
Source: www.clsa.com

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 Important disclosures Samsonite - BUY

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Companies mentioned
Samsonite (1910 HK - HK$5.82 - BUY)
Boeing (N-R)
Hilton (N-R)
Hyatt (N-R)
InterContinental Hotels (N-R)
Marriott Intl (N-R)
Walt Disney (N-R)

Analyst certification
The analyst(s) of this report hereby certify that the views expressed in this research report accurately reflect my/our
own personal views about the securities and/or the issuers and that no part of my/our compensation was, is, or will
be directly or indirectly related to the specific recommendation or views contained in this research report.

Important disclosures
Recommendation history of Samsonite International SA 1910 HK

Date Rec Target Date Rec Target

LATEST BUY 9.84 01 Jun 2018 BUY 36.60
05 Feb 2020 BUY 18.35 15 May 2018 U-PF 36.60
15 Nov 2019 BUY 19.80 15 Mar 2018 U-PF 37.90
14 May 2019 BUY 24.90 08 Jan 2018 O-PF 37.90
14 Nov 2018 BUY 29.50 14 Nov 2017 O-PF 37.00
15 Oct 2018 BUY 33.00 24 Aug 2017 BUY 38.00
Source: CLSA

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