2 biggest reasons why Samsonite is going to be impressive in 2H

Its multi-brand strategy will drive market share.

Maybank Kim Eng continues to be positive on Samsonite. Analyst noted two reasons for this.

Here's more:

1) we believe it will continue to gain market share, as driven by its multi-brand strategy and product portfolio diversification effort.

2) we also like its strong M&A execution, as revealed by the just acquired Hartmann and High Sierra’s sales performance in 1H13; Currently Samsonite holds USD165m in cash, therefore we believe it is in good position to pursue further M&A opportunities going forward.

Key catalysts are: structural EBITDA margin uptrend and market shares gains. Key risks to our call: FOREX volatility and economy slowdown. Transfer coverage to Terence Lok. EBITDA margin uptrend.

1H13 adjusted EBITDA rose 19.9% YoY to USD164m on the back of 16.2% top-line growth YoY, despite a slight fall in the overall gross margin on sales mix changes, thanks to an efficient allocation of A&P resources globally.

Going forward, we expect the GP margin to be stabilised at the 53% level with distribution expenses remaining at 6.8%. We maintain our forecast of EBITDA margin at 16.7% for FY13, implying a 57bps YoY increment.

Updates on key markets. Ex-Fx, China saw 8.1% sales growth in 1H13, dragged down by flat growth in 2Q13. Nonetheless, management had guided for 10-11% growth for FY13F, signalling growth should resume in 2H13.

North America experienced a 10% YoY sales growth on an ex-M&A basis, outperforming Tumi which reported weak wholesale channel growth in North America. Germany and Russia recorded strong double-digit sales growth YoY, offsetting the sales drag in Spain and Italy.

Latin America saw 5.2% growth, mainly as a result of changing distribution in Brazil to a direct model, but growth in Chile is still encouraging. High Sierra and Hartmann together generated USD50.5m in sales in 1H13 against our expectation of USD40m (~5% of 1H13 total sales).