Samsonite’s baggage is heavy with geopolitics – Reuters

HONG KONG, Sept 12 (Reuters Breakingviews) – Global companies trading in Hong Kong are busy mulling full or partial exits from the city through secondary listings and take-private deals. Of the restless group, luggage maker Samsonite International (1910.HK) has the least financial reason to mull a move. Its admission last month that it is “evaluating” venues beyond the Asian hub hints at the geopolitical pressure driving the exodus of multinationals.

The $5 billion U.S. and Luxembourg-based company was one of the first Western companies to list in Hong Kong. In 2011, then-Chief Executive Tim Parker saw the financial hub as the most “logical” place for a listing to tap the huge Chinese consumer market. Fast forward, and the bet seems to have paid off. Sales from Asia – Samsonite’s most profitable region – accounted for almost 40% of the total in the first half of 2023. The outlook is bright too as Chinese consumers are still splurging on travel despite the economic slowdown in the world’s second largest economy.

From a liquidity point of view too, Samsonite has had a better experience in Hong Kong than other international arrivals. Current CEO Kyle Gendreau notes “liquidity has always been a challenge”. But while the company is not as actively traded as hot Chinese consumer and technology stocks such as Anta Sports (2020.HK) or Tencent (0700.HK), its five-day average trading volume is at least four times higher than Italian fashion powerhouse Prada and almost two times that of European skincare group L’Occitane (0973.HK), and even beats the city’s top conglomerates such as Swire Pacific (0019.HK) and CK Hutchison (0001.HK), LSEG data shows.

It’s valued decently as well. Samsonite doesn’t have any major listed peers but the company is valued at 11 times its 12-month forward earnings. That’s better than other international consumer brands that boast similar levels of prestige. New York-listed Tapestry (TPR.N), owner of Coach, and Calvin Klein-parent PVH (PVH.N) trade at a multiple close to 8 times, for example. By contrast, Prada and L’Occitane command discounts to peers. Meanwhile, Samsonite has delivered a 36% total return to shareholders since January 2020, compared to the 27% loss for the broader Hang Seng Index (.HIS).

Yet there is one big consideration for Gendreau: does Samsonite want to be the only big foreign company left trading in Hong Kong without a hedge for its listing elsewhere? Inaction would make the company look complacent if Washington slaps sanctions on Beijing. That would be an extreme scenario but one that global investors’ China aversion suggests they are increasingly worrying about, and that alone makes having a Plan B looks sensible.

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CONTEXT NEWS

Samsonite International has no active plans to pursue a secondary listing, the Hong Kong-listed luggage maker’s Chief Executive Officer Kyle Gendreau said in a television interview on Aug. 17.

“There are no plans in place, but like any company or board we are constantly evaluating that [venues],” Gendreau told Bloomberg. He made the comments a day after the media company published a report citing sources saying Samsonite was exploring the possibility of a second listing in the US.

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