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Samsonite: On Track for Solid Year; Nomura Sees 21% UpsideBy Isabella Zhong
Nomura has lifted its target price on luggage maker Samsonite International (1910.HK) from HKD30.50 a share to HKD37 a share, which implies 21% upside.
Analyst Emily Lee argues the slowdown in the U.S. should not be a concern, while growth should remain strong in other regions:
Investors should not be concerned with the slowdown in core Samsonite on N America (1Q17: -0.9%; 2H16: 7.3%), as it was mainly due to Walmart and Sam’s Club delaying order placements ahead of American Tourister’s new launches.
For 2Q to date, management guides that growth has reaccelerated to 5%. Regarding negative growth at some select US department stores, management guides that these names only account for an insignificant portion of its distribution, and sales for its main wholesalers remain steady.
Constant currency sales growth for Asia rose to 4.3% in 1Q17 from 4.2% in 2H16, Europe (13.4% in 1Q17 from 11.8% in 2H16), and Latin America (23.5% in 1Q17 from 21.6%). According to management, growth has sustained in 2Q, to date, and the company is on track to achieve its mid-single-digit target for the core Samsonite business.
Lee also spies upside for Tumi, a New Jersey-based luggage maker that Samsonite acquired in March 2016.
We raise FY17/18F sales growth for Tumi to 15/18% from 13/14% on:
1) buyback of distributors faster than expected by the company, with South Korea/China/HK starting to contribute in 2Q17;
2) new product launches for Tumi to be rolled out in 4Q17 and 3) investment in marketing at 6.5-7.0% of revenue to boost sales.
Samsonite shares have gained 38% this year and trade at 19 times forward earnings, which is a tad above its five-year average of 18 times. The stock pays a 1.7% dividend yield.
Source: Barron's Asia
http://www.barrons.com/articles/samsoni ... 1495772752
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