Battle of the brands

Garry Laurence

Profeta Investments

For decades Nike has been a dominant force in sportswear. The global sportswear market is worth over US$350 billion in sales with the US market representing just over one third of that. Nike’s investment in footwear technology and it’s brand marketing and sponsorships has enabled to lead it’s competitors in developed markets. It’s wide global appeal has seen it’s sales rise to over $45 billion and it’s market capitalization soar to $200 billion. European brands such as Adidas, Puma and Fila have focused on niches in footwear and sportwear apparel, while an emerging brand out of Switzerland has focused on investing in new footwear technology and counts Roger Federer as a shareholder. During Profeta’s analysis of the sportwear market we were surprised to see that Fila generates over three times the sales and earnings as On Holdings yet it’s market capitalization is only US$1.5 billion, compared to On at $8 billion and Nike at $200 billion. What is even more surprising is that while Fila has a strong global brand developed out of Italy, that we all know, it also controls golf’s dominant brand, Titleist. It’s stake in the Titleist brand is worth over US$1.5 billion, which means that you are getting the Fila brand for free. We have always been puzzled with the low valuations in Korea but this is astounding for an owner of global sporting brands.

 


Fila Holdings
  Fila Holdings is a South Korean owner of sports brands. It’s brands include Fila and the Titleist brand, well known by golf enthusiasts. Fila was founded in 1911 in Piedmont Italy and has grown over the past century into a globally leading sportwear brand. Fila Holdings purchased the brand in 2007 and has continued to build out the brand around the world. The brand’s sales are evenly split between footwear and apparel. It is well known around the world with global ambassadors such as Ash Barty, Diego Schwartzman and Korean band BTS.   The Fila brand generated strong revenue and earnings growth in 2021, driven by growth in the emerging markets. For the group, revenue grew 21% and operating profit was up 44%. Sales in South America were up 35% and their licencing fee from China was up 30%.   Fila Holdings acquired global golf equipment maker Acushnet Company in 2011, becoming the owner of leading golf brands such as Titleist, paying $1.23 billion. It then listed Acushnet in the US in 2016 and still holds 50% of the company. Their stake is currently worth US $1.5 billion. The Fila brand is growing very quickly in China and is one of the leading brands there. Fila Holdings has a joint venture with Anta Sports, which is listed in Hong Kong. Half of Anta’s sales are represented by the Fila brand and Anta Sports trades at a market capitalisation of US$32 billion. This is a perfect example of how companies around the world can trade quite differently on different stock exchanges and you can find significant valuation arbitrages.   


 

  
  
  Price/earnings
  
  
  EV/EBITDA
  
  
  Price/Sales
  
 
 
  
  FILA   Holdings Corp.
  
  
  7.3
  
  
  3.7
  
  
  0.5
  
 
 
  
  adidas   AG
  
  
  21.0
  
  
  9.9
  
  
  1.8
  
 
 
  
  NIKE,   Inc. Class B
  
  
  34.8
  
  
  26.4
  
  
  4.6
  
 
 
  
  Li   Ning Company Limited
  
  
  27.6
  
  
  15.6
  
  
  5.8
  
 
 
  
  361   Degrees International Ltd.
  
  
  10.1
  
  
  1.6
  
  
  1.2
  
 
 
  
  ANTA   Sports Products Ltd.
  
  
  22.7
  
  
  12.3
  
  
  4.0
  
 
 
  
  PUMA   SE
  
  
  26.7
  
  
  10.6
  
  
  1.6
  
 
 
  
  Asics   Corporation
  
  
  25.4
  
  
  9.6
  
  
  1.0
  
 
 
  
  On   Holding AG Class A
  
  
  364.3
  
  
  48.7
  
  
  9.2
  
 



  The question for Fila Holdings, is when will Korean and global investors finally attribute a fair value to this company and the assets that it owns. The stock could double from here and still trade at multiples well below its peers like Adidas and Puma.
  


Fila Holdings

Fila Holdings is a South Korean owner of sports brands. It’s brands include Fila and the Titleist brand, well known by golf enthusiasts. Fila was founded in 1911 in Piedmont Italy and has grown over the past century into a globally leading sportwear brand. Fila Holdings purchased the brand in 2007 and has continued to build out the brand around the world. The brand’s sales are evenly split between footwear and apparel. It is well known around the world with global ambassadors such as Ash Barty, Diego Schwartzman and Korean band BTS.

The Fila brand generated strong revenue and earnings growth in 2021, driven by growth in the emerging markets. For the group, revenue grew 21% and operating profit was up 44%. Sales in South America were up 35% and their licencing fee from China was up 30%.

Fila Holdings acquired global golf equipment maker Acushnet Company in 2011, becoming the owner of leading golf brands such as Titleist, paying $1.23 billion. It then listed Acushnet in the US in 2016 and still holds 50% of the company. Their stake is currently worth US $1.5 billion. The Fila brand is growing very quickly in China and is one of the leading brands there. Fila Holdings has a joint venture with Anta Sports, which is listed in Hong Kong. Half of Anta’s sales are represented by the Fila brand and Anta Sports trades at a market capitalisation of US$32 billion. This is a perfect example of how companies around the world can trade quite differently on different stock exchanges and you can find significant valuation arbitrages.

Price/earnings

EV/EBITDA

Price/Sales

FILA Holdings Corp.

7.3

3.7

0.5

adidas AG

21.0

9.9

1.8

NIKE, Inc. Class B

34.8

26.4

4.6

Li Ning Company Limited

27.6

15.6

5.8

361 Degrees International Ltd.

10.1

1.6

1.2

ANTA Sports Products Ltd.

22.7

12.3

4.0

PUMA SE

26.7

10.6

1.6

Asics Corporation

25.4

9.6

1.0

On Holding AG Class A

364.3

48.7

9.2

The question for Fila Holdings, is when will Korean and global investors finally attribute a fair value to this company and the assets that it owns. The stock could double from here and still trade at multiples well below its peers like Adidas and Puma.

  



Garry Laurence
Chief Investment Officer
Profeta Investments
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