Thursday, 28 August 2014

Thoughts on two Hong Kong listed consumer theme stocks: Samsonite and Prada

I have been a long-term supporter of Samsonite which, as I detail here, is in a prime position to benefit from a burgeoning travel boom in Asia and especially, of course, in China.  Results released over the last 24 hours reiterated the company's growth profile with even high single digit growth in the more troubled Chinese and European markets: 

This was a pleasing set of numbers driven by the core Samsonite brand of course (although I note continued progress of all the company's brands in line with hopes noted at the above link).  

I talked back in June about the HK$23 level to buy some stock and running through the numbers this conclusion remains about correct.  One to buy on any generalised pull-back. 

Did you see those blow-out numbers from Tiffany's yesterday?  Undoubtedly part of the reason for their strength were the rising proportion of sales to Asia as noted below.

So why then does Tiffany's have a soaring share price and this is what Prada's 1 year share price looks like?:

I last talked about Prada when it fell below that interesting resistance/support level of HK$55 back in June (link here) where I concluded that despite dulled recent earnings growth:

'...given the high strategically positive exposure to Asia a company to be keeping in touch with - it will be wonderfully correlated with local sentiment and spending.  So a longer-term branded winner.  My instinct is to initiate a starter position now and augment each round number level down i.e. HK$50, HK$45 etc...Volatility is sometimes opportunity'

Due to a specific issue with my international equities provider (only closing transactions were available back in June) I did not put on a starter position but I am still thinking about the company...which brings me to the latest set of numbers (a set of preliminary sales numbers which can be found here).

First half results were in line with expectations at the headline level, with revenue up 1% (and +4% at a constant currency level).  Geographically some areas were good (China, US) whilst others were more mixed (other Asia, Europe).  Certainly compared to Samsonite above the results were not as thematically compelling shorter-term.

I also note the slightly disturbing comment in the concluding statement which observes geopolitical risks/volatility and also notes:

'Upon approval of the results for the first half of 2014, the Board of Directors shall – in light of the results achieved in the first half of the year and with a clearer view of the outlook for the months ahead – update its guidance for the year as a whole'

The full set of numbers will be out on 19 September.  Clearly there is some risk of a guidance cut but what I find interesting is the flat-lining of the shares.  My instinct is that my observation in June still holds:

'...initiate a starter position now and augment each round number level down i.e. HK$50, HK$45 etc...Volatility is sometimes opportunity'

Now to see whether I can technically buy a starter position or not...

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