Samsonite: bargain at €1.36 or a debt-laden trap?
Samsonite is trading at lows with a P/E of 8.28 and a 6% dividend yield, but €2.3 billion in debt and a planned share issue give investors reason to hesitate.
English · Original discussion in Spanish · Published
Samsonite: a P/E 8.28 bargain or a trap with €2.3 billion in debt
Luggage maker Samsonite is trading at 52-week lows according to the TradeRepublic chart and can be bought for €1.36. It pays a 6% dividend and its P/E is below 8.3. Its brand portfolio includes Samsonite itself, American Tourister and the premium Tumi. Logic says the stock is practically being given away at that price. Prudence replies that there is a reason it trades that way.
The bull case: an 80% margin of safety
Supporters of buying see a textbook cyclical value case: a solid segment leader, global consumption below normal levels, and confusion caused by the share listing move to the United States with a capital increase. With an intrinsic value calculation of €2.50 against the current €1.36, the margin of safety would be hard to ignore in any other sector. The strategy, they say, is classic: buy low, collect the dividend while you wait, and sell high.
The fine print on the balance sheet
Sceptics do not dispute that the stock is cheap; they dispute why. Debt stands at €2.3 billion and is already costing 5.7% in interest; cash, despite the €670 million, is seen as a last-resort cushion. Operating cash flow is at €500 million and falling, with a real risk of dropping to €300 million, and capex has been cut from €100 million to €85 million, a somewhat artificial way of propping up free cash flow. On top of that comes the planned capital increase to land on Wall Street, with discounts of up to 15% that dilute current shareholders. This camp's conclusion is less poetic: it is a cyclical stock, expensive to hold, with a dividend possibly on shaky ground.
All that's left is the price
It comes down to the suitcase on the baggage carousel: perfect in the shop, but hard to drag once it's full. For some, the stock is already trading at liquidation levels, and the market is charging it 5.7% on its debt, almost exactly what its dividend promises. With a consumer recession underway, nobody is in a rush to price it in. Time will tell whether this was the moment to buy the ticket or to wait for the next carousel.
Luggage maker Samsonite is trading at 52-week lows according to the TradeRepublic chart and can be bought for €1.36. It pays a 6% dividend and its P/E is below 8.3. Its brand portfolio includes Samsonite itself, American Tourister and the premium Tumi. Logic says the stock is practically being given away at that price. Prudence replies that there is a reason it trades that way.
The bull case: an 80% margin of safety
Supporters of buying see a textbook cyclical value case: a solid segment leader, global consumption below normal levels, and confusion caused by the share listing move to the United States with a capital increase. With an intrinsic value calculation of €2.50 against the current €1.36, the margin of safety would be hard to ignore in any other sector. The strategy, they say, is classic: buy low, collect the dividend while you wait, and sell high.
The fine print on the balance sheet
Sceptics do not dispute that the stock is cheap; they dispute why. Debt stands at €2.3 billion and is already costing 5.7% in interest; cash, despite the €670 million, is seen as a last-resort cushion. Operating cash flow is at €500 million and falling, with a real risk of dropping to €300 million, and capex has been cut from €100 million to €85 million, a somewhat artificial way of propping up free cash flow. On top of that comes the planned capital increase to land on Wall Street, with discounts of up to 15% that dilute current shareholders. This camp's conclusion is less poetic: it is a cyclical stock, expensive to hold, with a dividend possibly on shaky ground.
All that's left is the price
It comes down to the suitcase on the baggage carousel: perfect in the shop, but hard to drag once it's full. For some, the stock is already trading at liquidation levels, and the market is charging it 5.7% on its debt, almost exactly what its dividend promises. With a consumer recession underway, nobody is in a rush to price it in. Time will tell whether this was the moment to buy the ticket or to wait for the next carousel.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (20 replies).
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