Yet Another Value Podcast - Rome Capital's Alex Feng and Jason Quan making the case for Samsonite $1910.HK

Episode Date: July 29, 2024

Alex Feng and Jason Quan from Rome Capital Limited join the podcast to discuss their thesis on Samsonite International (1910.HK), a leader in the global lifestyle bag industry and the world's best-known and largest travel luggage company. Alex Feng's write-up on Samsonite: https://alexfeng.substack.com/p/samsonite-1910-hk-another-homecoming Chapters: [0:00] Introduction + Episode sponsor: Ycharts [1:51] Alex Feng, Jason Quan and Rome Capital's backgrounds [3:15] Overview of Samsonite and why it's interesting to Alex and Jason [6:00] What is the average market participant missing with Samsonite [9:25] Why is Samsonite valuation a "cheap" multiple (in Rome Capital's opinion); why Samsonite a "A" business and not a "C" business; pricing power / consumer awareness [17:02] How important is Samsonite's warranty on their products / supply chain [21:18] Samsonite's dual listing plan / does Alex and Jason think that simply re-listing to the US can re-rate the shares [29:00] Instead of dual-listing, why not focus on buybacks [33:40] What happened to the private equity bid; history with CBC back in 2007 [36:13] Wholesale partners, is that one of their competitive advantages / how much does advertising really drive demand and consumption [39:47] Barriers to entry - what is the risk here with new luggage brands entering the market [45:49] Final thoughts on Samsonite Today's sponsor: Ycharts This episode is sponsored by our friends at YCharts, the ultimate platform you need in your toolkit for turning your financial insights into captivating client conversations. With YCharts, each output is a powerful visual that brings your analyses to life and intuitively explains the “why” behind your strategy. Don’t get bogged down in the nitty-gritty of data and report creation — with features like PDF Reports, proposal generation, fundamental charts, and free content resources, YCharts gives you the visual edge you need to make a lasting impression and seal the deal. Click here to start your free YCharts trial and level up your game with YCharts: https://go.ycharts.com/yet-another-value

This episode is sponsored by our friends at Y Charts, the ultimate platform you need in your toolkit for turning your financial insights into captivating client conversations. With Y Charts, each output is a powerful visual that brings your analysis to life and intuitively explains the why behind your strategy. Don't get bogged down on the nitty-gritty of data and report creation. With features like PDF reports, proposed generations, fundamental charts, and free content resources, Y-charts gives you the visual edge you need to make a lasting impression and seal the deal. I do a lot of posts on yet another value blog. And if you'll notice in almost every post, I have charts that come straight from

Y charts. And the reason is simple. The charts look great. And, you know, I don't want to spend my time creating charts and creating graphs and everything I want to spend my time writing or researching or reading. And with Y charts, I can get great looking charts and I can get them really quickly and exactly how I want them. So if you are interested in Y charts, click the link in the show notes to start your free

Y charts trial and level up your game. with white charts. That's check the link in the show notes. All right, hello, and welcome to the yet another value podcast. I'm your host, Andrew Walker. If you like this podcast, it would mean a lot if you could rate, subscribe, review, wherever you're watching or listening to it. With me today, I'm happy to have on from Roan Cat, Alex and Jason Kwan. Guys, how's it going? Hi, Andrew. We're doing great. Thank you so much for this podcast. Hey, well, thank you guys. Thank you guys so much for coming on. I want to get into

a bunch of different things, but before we get started, just remind everyone that nothing on this podcast is investing advice. You know, please consult a financial advisor, do your own work. That's always true, but today we're going to be talking about a Hong Kong listed, obviously international stock. It's on the bigger side for a Hong Kong listed stock, but obviously international stocks carry extra ricks, extra tax consequences, all that sort of stuff. So again, not financial advice. Please consult a financial advisor. Alex Jason, I generally hop straight into the idea in this podcast, But, you know, you guys are, as we were talking about before, newer on the podcast or newer round. So I just wanted to give you guys a quick opportunity to introduce yourselves, your backgrounds,

of what you're doing. So maybe Alex, do you want to go first? Sure, perfect. Thank you so much. And it's really our honor. So we are Alex and Jason. We were classmates from Columbia Business School. We had our MBA over there, value investing.

So we're now launching the Rome Capital and what we're trying to do is number one is on special saturation opportunities and number two is on the small and mid-cap growth company, mostly in the Europe or U.S. exchanges. So today we're bringing Samsung Knight to the podcast. it falls in the special situation category. Jason, did you want to add anything there or do any of your background? I very feel that Alex and I, we graduated from Columbia and we studied when we investing. We have the same class, classmates. So here's the founder and co-founder of Rome Capital, so it's a mainly family capital business.

So that's it. Perfect, perfect. Well, let's dive into the idea that we were kind of chatting about and looking at. So the idea is Samsonite. ticker is 1910. Again, that's traded in Hong Kong. So everybody should just keep that in mind. This has been a pretty popular kind of dual special situation value investment among among value investors, special situation investors, at least that I track in. So really excited to do it on the podcast. Alex, I guess I'll just toss it over to you, though. What is Sam tonight

and why are so many investors interested in it right now? Okay, great. So a couple of points. So number one, Samsung Night is a global luggage pace leader. So it's a niche industry and not many famous brands. So Samsung Night has three major brands. That is Samsung Night for the upper end to me for the premium brand and also an American tourist for the mid-end. And so it is a leader. And number two is that during COVID,

the industry had a huge problem because people suddenly stopped traveling. But during that time, Samsung Night, the management has really turned around the business. They closed 300 stores and have a much higher sales per store and much higher margin than pre-COVID. So that turnaround was pretty successful. And number three is that the valuation of Samsung night is their cheap. So on a forward basis, the PE ratio is around 9 and EVBDA is 6 and a half. That is because it is listed in Hong Kong and, you know, that exchange is really, you know, given up by the investor community. But what is good is that the company is making the moves, they are going to do a secondary listing either in US or in Europe, probably in the first half, 2025, so in the year's time.

And we found that the peers, many consumer brands in the US, most of them are trading at 20 times. So in that sense, we think there could be an upside as big as 100%. Jason, did you want to add anything to that? Nope. Great. A high high, that's it. So I want to dive into a bunch of different things, but let me just start. And either of you do can ask it.

I think I'm going to, you guys are my guinea pigs. I'm going to try and make this my first question on the podcast going forward, assuming I can remember. But look, the world is a competitive place. right this is i guess my question is like what are you seeing that the average market participant is missing here like what do you kind of think your edge that's going to result in alpha from this investment yeah let me get get to it first and jason you may add on if you want to so uh in our opinion uh the hong kong market is you know it's deserted but you know you know Number one, since COVID and the trade war between China and US, the Ukraine war, the geopolitical tension, a lot of global LPs, they are very cautious about Chinese-related assets.

So they're drawing their money back from Hong Kong as well as mainland China. you know as a hong kong listed international company the samson night has how to say the collateral has had the collateral damage so uh you know before covid samson night's p e and most of the time was over 20 times but now even the business is in a better shape it still get a much lower valuation. And number two is that, you know, because Hong Kong is an offshore market. So both the most of the listed company as well as the investors are offshore investors. So, you know, so it is very clear.

So whenever the market, you know, has a crisis or something, they will draw the money from Hong Kong to their home company. countries first. So, you know, I've been investing in Hong Kong for 10 years. I never seen a Chinese analyst or PM talking about Samsung lights or other Hong Kong listed international company. So it's really, you know, it never got the attentions from the mainstream investors in Hong Kong. So that is why we think going to a, you know, European or the U.S. exchange, you will get more attention. And, you know, also, you know, the management team, they are based in the U.S., they're Americans. They will have better communication with the U.S. investors.

So we believe those would help. And Jason, would you like to add anything? Yeah, just one quick point, speaking of liquidity, the liquidity issue in Hong Kong Stock Exchange is almost worse among the world, almost like 1 over 10 compared to the U.S. So if you have equity issues, probably your valuation won't go too high. Yep. So it sounds, you guys are making an exchange argument, right? And I've seen this before. It's funny, like I've joked and sometimes people don't get the sarcasm when I say it.

Like, I look at a lot of London listed stocks and like the London market is basically a developing market at this point, right? Like companies are left for dead, all that. I certainly, I certainly hear you on that point. But I guess this will actually take me nicely to my next point. Like, Alex, when you were going through the overview and you did a nice job there, you were talking. You said, hey, look, the company is trading six and a half times EBITDA, like 10 times P.E. And look, those are cheap multiples. you know, the SMP 500, I think you mentioned your write-up probably trades for 20 times price

to earnings now. I don't think anybody's going to compare Sampsonite to Google or Meta or something. But, you know, those are cheap multiples. But when I hear Samsonite, I say, oh, yeah, that's the people who make the expensive travel luggage. When I hear travel luggage, I kind of say, oh, that seems like a pretty low margin, low-returned business. Like that does seem like the type of thing that we trade for 10 times price earnings. Like ignoring the COVID recovery, like this is a business that probably goes.

at GDP or maybe sub-GDP, it doesn't seem like it be hard to start making baggage. So I guess my question would be like, why is 10 times price to earning six times, six and a half times EBT? But I was like, why is that a cheap multiple? Yeah, Jason, maybe you would you would like to talk about the mode of Samsungites. And yeah, we can argue that it is a, it is a not bad business. and deserve a decent model. Sure, I would agree that.

First, we want to set a tones. It's not like a or a plus business, right? But after all, we like it. We think it's maybe a B or B plus business, meaning that it has certain barrier to entry and competitive advantages with a foreseeable, very long growth runway. Three points we want to talk about it.

Firstly, it's a brand awareness, right? If you interview a consumer, Sonsonite or Tumi or Migan Tourista will pop up very quickly on their mind. And something that has a very strong portfolio of them. And that portfolio actually gives them some pressing power. For example, in the past four or five years, their ASP has been increasing about 5% Kager. It's not perfect like LVMH, right?

But that demonstrates that their brand has some pricing premium. Let me just dive into that real quick, Jason. I hear you. They've increased 5%. And like as soon as you guys said Samsonite and Toomey, I don't pay attention to it, but I kind of knew what they were. And like Samsonite in my head, it's Samsonite, right? The one with the silver, the square silver luggage that everyone has in the airport, right?

That's kind of hard. That's the Samsung brand. Am I remembering that correctly? That sounds like Remova, right? Which one? The silver one with with aluminum? I think the silver one that sounds like that's not through moa. Maybe there are multiple ones because Samsonite, if I remember also had the silver one I'm

thinking of in their presentation. But let me just either way, like you say, hey, it pops into consumers mind and I hear you but and maybe I'm unique in this. But if I was looking for luggage, like what I would do is I would go to Amazon and I would type in luggage and I would probably buy like the first one that was kind of the cheapest. And Samsonide, I believe, has 15% of the market and their returns on invested capital are like actually above their cost of capital. So maybe I'm being too harsh on this, but you know, I'm kind of surprised. Like I'm looking at Amazon as we speak. There is an Amazon basics,

like nice, hard side carry on luggage, 70 bucks you can buy it versus Samsonide does pop up pretty early in there, but they've got like $300 plus luggage. I think those are two pieces. But, you know, I'm just, I'm a little surprised that they have any pricing power that they can get above market returns on invest capital. Like, why is that? Because luggage, you're going to buy once every 10 years. It's not a habitual purchase. Again, you can get it on Amazon. Like, I don't think people are searching Samsungites specifically.

As you said, it's not LBMH. So why do they have pricing power? Like, why is this a B business and not, in my mind, what I'm painting it as a C-minus business? Yeah. The second point I want to talk about is about like a scaling. for example if you in the amazon run you just type mortgage you probably come to swiss amazon private label and something that will be there but mostly something nice pricing for example a carry-on mortgage about 125 150 bucks they do they have some premium ones like more than 300 dollars or even

someone similar pricing to remova but most of them is still the similar price like 100 to 200 bucks but here we want to talk about the scaling the reason is that come on it's just doable right more is most like a commodity business but because of their scaling their sourcing has some advantages their procurement cause is about due to our resource about 15 to 20 percent at the most lower than some smaller peers so that they will have a better ebdar margin because they have a lower cause of goods sold and also about advertising right for example VIP is a local brand in India, very competitive, I remember, but their total revenue is $700 million per year. However, some sometimes have for $4 billion, meaning that they will have a $200 million advertising budget each year.

That helps. And a very minor point about the scaling is that, for example, if you buy Amazon Basic, for example, some private brand in the States, right? and you're traveling to Europe, you're traveling to China, and it's broke. What are you going to do? Probably find a new one, but in Sonsonite, you have a warrant. If you travel to China, you can fix it there. If they couldn't fix it, they will give you a new one. This episode is sponsored by our friends at Y charts.

The ultimate platform you need in your toolkit for turning your financial insights into captivating client conversations. With Y charts, each output is a powerful visual that brings your analysis to life and intuitively explains the why behind your strategy. Don't get bogged down on the nitty-gritty of data. and report creation. With features like PDF reports, proposal generations, fundamental charts, and free content resources, Y charts gives you the visual edge you need to make a lasting impression and seal the deal. I do a lot of posts on yet another value blog. And if you'll notice

in almost every post, I have charts that come straight from Y charts. And the reason is simple. The charts look great. And, you know, I don't want to spend my time creating charts and creating graphs and everything I want to spend my time writing or researching or reading. And with Y charts, I can get great-looking charts, and I can get them really quickly and exactly how I want them. So if you are interested in Y-charts, click the link in the show notes to start your free Y-charts trial and level up your game with Y-charts. That's check the link in the show notes. I am laughing because I told my wife, I was like, hey, I'm going to be doing a podcast on Samsonite. And she actually wanted me to tell you guys when we were in Europe like two years ago or something, her, she had a Samsonite and it broke.

Now, we did not know about the warranty and we did not get a fit, but she just wanted you guys to know that she had a Samsonite and it broke on us and she was lugging around, you know, a wheel bag where the wheel wasn't working. So I'm just saying it because you, you mentioned how important. So let me just dive into these things. How important is the warranty, right? Obviously, I mentioned my wife her luggage broke, but I've never had a piece of luggage break on me before. And like, kind of to me, you say, oh, if you have a luggage, you have your luggage break in China, Europe, wherever, you can get the warrant. and have them replace it. In my mind, I would have never thought of that. Actually, it's a minor advantage to my point.

My luggage, my Sonsonite really screwed up when I was traveling in Japan. I even forgot I got the word, but again, when we say brand awareness and scaling, there are like multiple factors making certain competitive agent. And also I want to talk about actually is a niche market. To our research is not only 15% of market share, probably more like 17, 18, close to 20. If you look at their revenues, meaning that at a global basis, it's a relative niche market. Meaning, for example, if you are a consumer brand conglomerate, do you want to go to this niche market and begin a pricing board?

Probably not, you may, but you are less incentivized to do that. that. So again, the third point I want to say it's just a niche market. Go ahead, Alex. Yeah, Andrew, I hear you that, you know, I have been joking with my investor friends. So Samsung night, this type of brand and products are not for value investors. You know, if I'm going to buy luggage, I'll do the same way as you do. But, you know, But when we talk to our wives, you know, a Samsung and I brand is nice to have, you know, even for me, it's nice to have if I want to pay for the, you know, extra money to have a good brand, good quality, good insurance on the products. So, yeah, I believe it's better than, it's still better than no brand products. products.

I completely, I don't disagree with you. I just, you know, in my mind, and this is one of the things we all learn and investing, right? Like, the way you view the world is not the way other people view in the world. Like, I've never smoked tobacco and I have no interest in that, but a lot of people do. And that doesn't mean I can't like, you know, those macro stocks have great modes. Now, decline modes because all their customers are dying. But, you know, just because you don't see something one way doesn't mean other people don't

see another way. I want to go to one other thing Jason said. Jason, you mentioned, I think it was kind of like a 15 up. And of course, Jason dropped as I was going to it. Alex, maybe you can take it or maybe we can grab Jason back if he comes back in. But Jason mentioned a 15 to 20% advantage for Samsonite over their competitors in terms of sourcing. How do they get 15 to 20%? Just be curious on that side.

Yeah. So the number we got was from the industry people. So different people say that. So we believe in that. And it's a range between 10 to 20. But I think 15 is a credible number. Yeah, that's because of their scale. And, you know, another proof of that is, you know, during COVID, during COVID, you know, a lot of the businesses had a supply chain problem. And because Samsung 9 has the biggest scale in the industry, so their inventory, their supply chain still worked well. So that gave them a big advantage. So I don't think it's unique in this industry. It happens in a lot of other industries, too. did you want to add anything to that no thanks okay perfect uh let's just move on so

i think a big i think a big thing people are looking at here is you guys are looking at and i know my other friends are looking at we talked about they're on the hong kong exchange they trade for a 10 times p e they're going to do a dualist right and they said this in the march thing they reiterated on their may and i just finished reading their may Q1 earnings call. They said, we're looking at dual listing. I guess I have two questions on dual listing. Number one, in May, they said, hey, it's a lot of time. We've hired banks. It's going to be a lot of work. It takes a lot of time. You know, this is not a near-term thing. Why is that not a near-term thing? I mean, especially their dual listing, not relisting. So it seems like it should be

pretty darn fast if they want to dualist somewhere. What's taking so long? Why is it take so much work? Okay. Number one, that is quite interesting. So number one, Even though on the March announcement, it said a due listing, but actually in our most recent communication with the company IR, they have changed it to secondary listing instead of due listing because for due listing, the stocks in different exchanges are not fungible, but we have confirmed with the company being fungible is one of their pre-act. behind this move so probably it would be a secondary listing and number two on the on the process or schedule of the secondary listing that is one thing we are not particularly happy about it we really we really wish the company could move more quickly on it and we even talked to the investment bankers and they believe if they work really hard on it, it could be completed in two quarters. So yeah, that's what we're not happy about. And

we really wish they could speed it up or there are some activists could urge them to speed up. But anyway, the company will give a clear schedule or a plan during their first half results in August. And the company I personally told us that he expected it to be completed in first half of 2025. So yeah, that's it. Look, dual listings, re-listing, secondary listings are all interesting, right? Like I think historically, every time someone has come to me and said, hey, you know, XYZ company trades in London or trades in Europe and they're going to change their listing from Europe to the United States, I would always kind of skeptically say, look, I mean, the company is the

company, right? It trades for $10 when it's in Europe. Why should change in your primary venue from Europe to the U.S. make a difference? And I've kind of seen one too many times, a company that's done that and seen their stock go up 50% to doubt it. And like in this case, I know people, I've seen people who are like, oh, this company, which is the dominant Spanish grocery store and trades on the Spanish exchange, they should relist to the U.S. to get a better rating. And I'm kind of like, oh, I don't know about this. But here, you know, it is a company that a lot of their earnings are from the U.S. it's a global business, like you can absolutely see it.

So I guess I am leading the witness, but do you guys really think simply relisting to the U.S. can re-rate the shares? And I guess I will ask, can you point to like, what multiple do you think kind of peers or this should trade at if it does relist to the U.S.? Okay, I'll take this one, maybe Alex could comment. So the first thing is that theoretically, right,

from a just pure value perspective, No matter where it's listed, their valuation should be the same. However, in reality, very unfortunately, it's just not, right? Even London companies want to go to US, for example, by AAG, right? They may be working on this. But again, what we think is that, firstly, in Hong Kong, just nobody taking look at it. No mutual fund, no hash fund, no big money from mainland China is looking at it. However, in the US, it's a mainly, it's a US company, largest markets to the US, and,

it's going to grow at a minimum, middle single digit in a foreseeable future, and it has an okay ebdard margin, right? It's acceptable. And with a reasonable dividend payout ratio about 35 to 40%, and the company just announced a buyback plan you haven't executed on it yet. From our understanding, this should welcome some mutual funds or some even 4-1K investors to look at it, because the pay dividends is stable business, it's made single digit, and it grows faster than US GDP. That's cool. And secondly, about comparables, I want to say it's tricky to find the perfect comparables because their direct competitors are either private company or under conglomerate. However, we can still find some hints. For example, if we look at some discriminatory consumer companies

with mid to high single-digit growth in a long run. For example, Yeti Holdings, right? It's for outdoor equipment. They produce like drink wear, cooler, backpack, etc. They're all looking about mid to high single-digit. Even with some headwinds right now, they're trading like 19 times PE. Another example you may argue with me is it can be a sportswear.

I know it's a sportswear, it's outdoor, it's durable, right? You can wear the sportswear for 10 years. They even have a recent no-single-digit decline, but still training at like 19.5 times PE. And pre-COVID, they have a mid-single-digit growth. They're treating like 20 to 25 PE. So that's the reason we're relatively confident that if they go back to the US, given some time, their multiple expansion should catch up to almost like 20 times. Alex, anything else?

Yeah, I would just add on a. anecdote, it was from the communication between the company CEO with one of our friends. So the CEO actually complained that they have done a successful turnaround during the COVID, and they held analyst meetings. And actually the major banks, Gomez Sachs, Morgan Stanley, they were all there. The problem is it is their Hong Kong team and they listen about it, they wrote about it, but the information, just the message just cannot, you know, transmit it to their US headquarters. So he hopefully, he thinks when they got this team in US or maybe somewhere else, they would

draw more attention from the investment bank analysts as well as the mutual funds. So maybe that will help. Let me ask you another question. So another pushback I always have on the relisting trade is look, okay, if they're trading for 10 times price earnings in Hong Kong and all the peers are trading for 20 times rates earning, like one way to capture that is to relist and let your stock re-rate. But a better way to capture that would be buy shares as aggressively as you can, on the open market while they're trading for 10 and then relist or they didn't sell to private equity and we can talk about private equity sales in a second and it does strike me like samsonate again

it's a low growth business that generates a lot of cash and as uh that generates a lot of the cash and as you guys mentioned and as they mentioned if you look at their own call they're getting ready to start returning capital to shareholders and it seems like correct me from wrong they're going to do that through a dividend and I guess I want to ask you guys why don't they just capture this for themselves. Like, I believe your write-up mentions, hey, between the CEO and the chairman, I think they own combined over $100 million worth of stock. Like, these guys should be very incentivized by the share price. Why don't they just buy back a ton of stock and then keep doing it until the market either gets the hand or, you know, they become the first

company to do the famous, what happens when you buy back the last share? Oh, yeah. Actually, that is what they are trying to do, though not on a very large scale. you know earlier in june they announced to buy back 200 million shares uh yeah it was it yeah 200 million shares and that would account to 5% of the total shares outstanding and what's the motivation behind it is to you know to use the shares they buy back to then issue it on the secondary listing so that kind of is what you have suggested but yeah we do appreciate it if they can do it on a larger scale but you know the fact is in Hong Kong China there isn't culture for share by share buyback so the

companies just prefer to pay dividends over here and hopefully if the company could list in the US the investor community could make some activism to make to help them make smarter capital allocation decisions and on the shareholding of the company management team they have enough skins in the game so yeah they benefit if the stock price go up and they get hurt if the price goes down but on whether they are going to buy uh buy stocks by themselves i think it's just their personal decision we cannot comment too much but another one want to say yeah is that from Andrew with an understanding right maybe someone say hey why don't you go private right and then you go back home to the US release and however privatization is not a super easy

process in Hong Kong stocks change so that it makes things complicated well and we remember the CEO delivery say they they don't consider privatization so probably secondary listing is the best for them. This episode is sponsored by our friends at YCharts, the ultimate platform you need in your toolkit for turning your financial insights into captivating client conversations. With YCharts, each output is a powerful visual that brings your analysis to life and intuitively explains the why behind your strategy. Don't get bogged down on the nitty-gritty of data and report creation. With features like PDF reports, proposal generations, fundamental charts, and free content resources, Y-charts gives you the visual edge you need to make a lasting impression and seal the deal.

I do a lot of posts on yet another value blog. And if you'll notice in almost every post, I have charts that come straight from Y charts. And the reason is simple. The charts look great. And, you know, I don't want to spend my time creating charts and creating graphs and everything. I want to spend my time writing or researching or reading. And with Y charts, I can get great looking charts and I can get them really quickly and exactly how I want them. So if you are interested in Y charts, click the link in the show notes to start your free Y charts trial and level up your game with

watch cards. That's check the link in the show notes. No, it's funny you ask that because that was my next question. You know, back in it was either late February or early March, Bloomberg reported that they were, I believe the report was private equity had expressed interest in taking them over and they were considering strategic options or whatever. And, you know, the stock, I'm just looking at the chart as we speak, the stock goes from 23 to 25 to, it peaks at over. over 30. And as you and I are talking today, it's kind of in the 20 to 21 range. So I was going to ask you what happened with the private equity bid. And I think the other thing listeners might be interested in 2007, correct me if I'm wrong, they were taken over. They were owned by, oh, it's a good private equity phone. But I can't remember the name off the top of my head. It's think it starts with a C. But CBC, it was CBC. CBC took them out in 2007. So not only has private equity expressed interest in them now, they do have some past history with private equity. I don't know, Jason, you were kind of, of addressing that. I don't know if you want to finish talking about that specific rumor or private equity going forward possibilities.

Yes, so in my opinion, it could be that several private equities have discussed that opportunity internally, but we believe nothing has been, you know, has been offered to the company, because if two per the exchange rules there should be a you know suspension on trading you know of the stocks but nothing happened and then until now and you know as a company announced to do the secondary listing and then people stopped you know stopped uh arbitraught uh how to say uh guessing about people stop thinking that's a viable option, at least for the moment. Yeah, so it's a complete rumor, in our opinion.

But, you know, the valuation is really low, and the private equity firm does see value, especially, I think, at the low price today. Let's put the dualisting and the private equity story side. I think we've addressed it pretty nicely, and I think people can see, like, that is the major catalyst. That's kind of the sexy piece of the story. But I do have one more piece of the business I want to come back to, right? So I was looking at the Q1 results. And 20, for this is Q1, but, you know, even though Christmas, I'm sure is a big season and summer, probably broadly representative of the year. 27% of their sales are retail. So they own their own stores,

you know, Samsonite Toomey stores. I'm pretty sure I've seen Samsonight stores in airports before. about two-thirds of the sales are wholesale. So, you know, they sell to Amazon, which sells it, or they sell to Target, which sells Cincinnati luggage. I'm not sure where they're selling, but, or, you know, your local travel store. And then 10% is online e-commerce. They call it DTC. So I think that's someone going on to the Samsungite website and buy them.

And I just want to ask, the wholesale business is such a big piece of that business. Obviously, like, they've got relationships with retailers, all that sort of stuff. But I just wanted to, I hate to use double-click. My consulting terms are coming out. I just wanted to click on that for a second, talk about like, look, when I see two-thirds and it's the major luggage person with 15% of luggage share, like, it seems like they've got a distribution advantage there. And I just want to talk about, like, who are their wholesale partners?

How does those, how did those relationships look like? Am I right that that's probably one of their competitive advantages? Does all that make sense? How to say, yeah, we do. believe, you know, as a leading brand, they should have the largest, you know, distribution channel in the industry. So, but, you know, based on our communication with the company or with the industry people, nobody emphasized that point, you know, very much. But, yeah, that's an interesting point. We can, you know, dig more into it. So, Jason, would you like to

that on anything? Nope. Let me ask one more point. Jason earlier was mentioning, you know, this is a thing, right? You sell, you own 15% of the industry. You're the largest person. Look, you can put more money into advertising and it will be a lower percentage of your sales than other people. And that creates huge advantages for things where advertising is a driver. The bigger advertising is as a driver of demand, the better because then you've got a bigger advertising budget. It's lower and your sales that creates a very virtuous cycle, which is how much does advertising really drive demand and consumption here? So basically your question is asking that is the advertising

is a key driver. Yeah, yeah, exactly. Yeah. Yeah. So firstly, we think it doesn't help, it doesn't help, but I think the most important thing is that the brand-aware is basically that they already, their brand already rooted in the conception of the consumers, right? The example I mentioned that we do some quick surveys, right? Just their names or their portfolio company's name just quickly pop up. And right now, if we just Google it, we can easily see somewhere in a travel website, some sunlight advertising just pop up. And we think it also helps.

However, we do not have direct ROI data on their advertising. thing. So we have to go with our common sense. It helps. But the brand is, I think, is more important. Nope. Makes total sense to me. I just, again, it's a tougher market for me. One more, and then we can kind of hit last thoughts and wrap this up. You know, right now they've got 15%. But when I, I just Google travel luggage. And you mentioned Yeti earlier, which is why I'm asking the question. But, you know, Yeti pops up as they have Yeti luggage now, which is kind of funny to me, but they've got Yeti luggage. There's away travel, which I'm not familiar with, but the luggage looks very much like Samsonite. Now, it looks like they're selling at a premium,

but I guess my question is, in today's world, I'm always worried about like legacy brand-ish, you know, whether it's Haynes with underwear or you can name your brand, but I'm always worried about legacy brands. It just seems a lot easier for startup brands to enter any market they want to now, right? They can find, they can find, they can find manufacturing in Asia. They can drop ship from Asia directly and they can do like heavy online advertising. So I do just want to ask like, you know, do you guys worry about whether it's Yeti or, you know, whoever wins the next season of the Bachelorette launching their own, hey, Bachelorette branded travel luggage? Do you guys kind of worry about maybe 2020 to 2022, they're kind of protected from new

just because nobody wants to launch a travel brand during 2020, 2022. But as we merged, like, going forward, they're kind of more prone to competition, if that makes sense. Oh, I'll take this one. Maybe Ali's can complement. So basically, not only Yeti Holdings, right, but also we have corporations. It's famous as far as outdoor shoes, order gear, Timberland, North Face. They also have a certain amount of meaningful market share. And we see in the past decade removal is really growing fast, right?

Especially under LVMH, they're growing like 9% Kiger in the past like 80 years also. But however, again, it's not the industry with extremely high barrier to entry. However, to build a brand as portfolio, it may take decades, right, like 10 years, 20 years. And also, again, as we said, if you even if we look at yet, we have quite, operations, right? It's a similar price. The product is almost identical to something like to me. It's not their core product portfolio. And given in the niche market, we do not think they have a strong incentive to go there, huge discount, crazy advertising to market their products. It's possible, but not a

very probable. Alex? Yes, Andrew, I think that could be one of the major risks of the business. And, you know, we do think the biggest threats are from some of the Chinese low-cost manufacturers. Actually, companies like Xiaomi, net ease, you know, those are Internet companies, and they broke into this category. But anyway, it won't be their main focus. They just made it and sell it if they can. And as they are, you know, if you look at the industry structure,

I think the no brand name products, it consists a big part of it. So the truth is, you know, a lot of people, there are a big portion of people who just don't care about the brands. the brands a lot but also there are quite some people still cares so we believe uh you know Samsung night could uh you know sustain its market share uh for a period of time uh you know just like the clumbia brands north face or yeti you know their products are not not difficult to manufacture either so they live on their brand name on their marketing on their marketing as good quality products as well.

You know, I agree with most of what you said. The only thing I would push back on is like, I do think a north face, right, where it's something that you put on so you visibly wear and you probably wear it, you know, maybe I am neglecting my, you know, former, I used to be a consultant, my consultant brother and who are traveling, you know, to four cities every week or something. But most people when they buy luggage are probably looking to you. it once a quarter, four times a year or something. So buying something with a 10-year view that you're using once a quarter and you're

probably maybe replace it every 10 years, I mean, my parents said they don't travel out, but they have luggage that is 30 years old, right, versus a North Face jacket, which what, you're going to use, I might wear my North Face jacket like every day or something, you know, and it's literally on me. So that label means more to kind of my brand identity than the suitcase I'm lugging behind me that I'm instantly going to store in my hotel. So I definitely hear you there, but, you know, there is something to, now, we're not saying this is a North Face business, right?

Most people would probably say North Face is like a B plus, A minus business. I'm just pulling that out, but something around there, whereas you guys were kind of like, this is a B minus, but that's the only place I would push back there. Okay. Yeah, I hear you. Yeah, you can, you know, give some discount on it, you know, if you like. However, you know, our point is that. at the end of the day, the secondary listing is at the door.

You know, it's going to happen hopefully soon enough, and we would like to see some reread after that. And we don't think we'll hold the company for five years or something. So, yeah, it's still a special situation play. Perfect. Makes total sense. Guys, we have hit most of my, as I say, most. We've had all of my questions for the most part. Just before we wrap this up,

is there any place you wish we had gone, we should have gone through, and any other thing you guys want to discuss, Alex, Jason, either of you? One thing is that many investors we talk to, they may concern that, right? Nowadays, globally, not only the U.S., not only in China, right? Globally, consumer retail has been under pressure. But we think, even though some headwinds. For example, their Q1 growth has been slowed a little bit, but it could be only temporary because you have to travel, right? Even when we look at the IATA data, we look at the Hilton or Marielle data, the travel industry is still growing, but just slower a little bit. So we think the headwinds should be temporary. Even if the worst case scenario, we look at 2008,

great financial crisis, it took them about 12 and one half a year to turn around and that's it. So I think this business is relatively resilient, even with some consumer headwings. Yeah, one point I'd like to add is that, you know, the global consumer demand headwind is there for everybody, for every consumer brands. No, I love that point because everybody, the first thing you mention is like, hey, what if there's a recession? just like, look, this company isn't heavily levered. Yes, if there's a recession, I'm sure their sales will go down. I'm sure everyone's sales will go down. But, you know, can we look through that?

Like, can we just talk about normalized earnings, normalized valuation? Like, if you're worried about a recession or you're convinced there's a recession, there's probably better ways to play than buying or passing on Samsonai, right? Like you can go buy puts on the indexes or you can find the most consumer sensitive stock that are really leveraged short. So I really like how you frame that, Alex. Yeah, yeah, if you buy other consumer names, if the, you know, things goes really bad. You get heat on the earnings and hit on the valuation too.

But if you buy Samsung night, even though the earnings got a little bit hit, you still get a revaluation on the multiples. So we think it's going to do better than other peers and you can hedge it, you know. Well, guys, look, I'm going to include a link to Alex's write-up in the show notes so people can go read that for the full write-up and probably it's on sub-sax so it's pretty easy to figure out how to communicate with these guys once you've got a link to the once you've got that late so Alex Jason look at it just thank you so much for coming on thank you for the interesting idea and hey good luck with

the launch of rome cat and be looking forward to having you guys on the future thank you so much thank you Andrew really appreciate this opportunity it's good hey thanks for going on guys a quick disclaimer nothing on this podcast should be considered investment advice Guests or the host may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.