Prada homecoming would set a financial fashion

Samsonite SA

18/10/2022 08:31

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own. Updates to add chart.)
    By Lisa Jucca
       MILAN, Oct 18 (Reuters Breakingviews) - A luxury house
always needs to guard itself. The $12 billion Prada  1913.HK  is
exploring ways to trade its shares in Milan where star designer
and co-Chief Executive Miuccia Prada’s grandfather opened the
brand’s first boutique in 1913. A partial homecoming would help
the Italian group break into top indexes while also creating a
hedge against fast-changing financial fashions.  
    Prada’s decision to list in Hong Kong in 2011 was arguably a
disappointment. The Italian brand was attracted to the Asian
hub by heady multiples and expectations of greater visibility in
mainland China, where it probably makes 25% of sales. Yet
its stock has returned just 16% to investors, including
dividends, since it listed, against more than 400% for larger
French rivals LVMH  LVMH.PA , Kering  PRTP.PA  and Hermes
 HRMS.PA  over the same period, Refinitiv data shows. Italian
luxury down-jackets player Moncler  MONC.MI , today as big as
Prada in market size, clocked total returns of 220% since its
Milan debut in 2013. Adding a euro-denominated listing venue
could make a difference.  
    Technical issues and the owners’ unwillingness to sell or
issue shares to avoid dilution of their 80% stake are
complicating the plan, people familiar with the situation have
told Breakingviews. But if Prada pulls it off, it will
automatically join top indexes including Milan’s FTSE MIB
 .FTMIB  and the MSCI Europe benchmark, attracting inflows from
large European index-tracking funds. That would boost its
trading volumes, which are thin in Hong Kong, but it may
not significantly lift Prada’s valuation, which at 25 times
forecast earnings is already 15% above Moncler’s and LVMH’s.    
    There will be other benefits. A Milan listing will
reduce Prada’s China risk. The company can’t do much about its
top-line exposure to the People’s Republic: it already has its
supply chain almost entirely in Italy. However, an additional
listing will give it a fallback option if frictions between East
and West intensify.  
    Any partial move by Prada will make Hong Kong’s bourse look
less desirable as a sole listing venue for a handful of other
prominent foreigners. Retailers including Samsonite  1910.HK 
and L’Occitane  0973.HK  had also jumped at the opportunity of
tapping Asia’s growing investor base while building up their
brands. Yet Hong Kong’s botched Covid-19 policy and a crackdown
on civil liberties is already translating into a decrease in
regional company headquarters in the city. If Prada’s listing
move is successful, it is likely to set a new trend.    
    Follow @LJucca on Twitter
    CONTEXT NEWS
    Hong Kong-listed Prada is actively exploring the possibility
of a Milan listing, people familiar with the situation told
Reuters Breakingviews.  
    Chief Executive Patrizio Bertelli said in September that the
company had not decided on whether to pursue a dual listing in
Milan. Chairman and Executive Director Paolo Zannoni flagged a
dual listing as a possibility in July.  
    The company is 80%-controlled by the family of co-Chief
Executive Miuccia Prada and her husband Bertelli. 
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 (Editing by Una Galani and Thomas Shum)
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