The Hour Glass

Swiss watchmaking in January 2012
The positive trend continues

After an excellent 2011, watch exports continued to grow steadily in January. Their monthly value totalled 1.3 billion francs, a rise of 15.5% compared to January 2011.

Bimetallic watches made the biggest contribution to the general upturn with an increase of 31.7%. Steel and gold timepieces on the other hand registered a slightly below par performance. In volume terms, bimetallic watches also featured prominently, as did the category of other materials.

A problem encountered by a supplier of data prevents us from publishing statistics by price segment today. They will be updated as soon as possible.

The Swiss watch industry’s three main export markets recorded particularly strong growth in January. This outcome was unexceptional for Hong Kong which remained aligned with the 2011 trend, as did China. The United States however picked up the pace slightly, following a minor slowdown at the end of last year. In contrast with these results, Singapore posted a significant decline. This downturn is however only an isolated variation reflecting an unfavourable base effect and an exceptionally strong month of December. France also recorded a two-digit decline, the largest in two years, which confirms the marked slowdown evident on this market since last autumn. Japan continued its good results of the second half of 2011 and numbered among the top six markets for the month of January.

Source: FHS

The Hour Glass ($1.30) - Hit $1.30 today.....

Finally, at the current price level of $1.30 Mr Market is now willing to price THG at a premium over its NAV/share, which I have previously projected as approx. $1.26 as at 31Mar12. But with a well-established and positioned business backed by a proven management team able to deliver steady business growth and superior recurrent profits, should the premium over NAV/share be just a little over 3%? Shouldn't Mr Market be willing to price the THG share based on a premium over its NAV/share which also takes into consideration its future earnings or EPS of say at least the next 1 year?

Based on the strong results for the 1st 9 months till 31Dec11.....
http://info.sgx.com/webcoranncatth.nsf/V...penelement
THG is poised to deliver a record NP of close to $55.0m and an EPS of approx. $0.234 for full-year FY12 (ending 31Mar12), and there are good reasons to be optimistic that FY13 (ending 31mar13) would be another reasonably good year.

Let's see how much of the projected EPS for FY13 would Mr Market be prepared to price into THG's share price going forward?

(15-03-2012, 01:44 PM)dydx Wrote: Based on the strong results for the 1st 9 months till 31Dec11.....
http://info.sgx.com/webcoranncatth.nsf/V...penelement
THG is poised to deliver a record NP of close to $55.0m and an EPS of approx. $0.234 for full-year FY12 (ending 31Mar12), and there are good reasons to be optimistic that FY13 (ending 31mar13) would be another reasonably good year.

If I were to assume that contributions from the 3 new shops will be as good as Q3 (Dec) plus Net Profit for Q4 (Mar) is going to be higher than Q3 (Even tho' Revenue will likely be lower, Admin Expenses will be a lot more lower due to Year end Bonuses already paid in Q3), I estimate EPS = 25.6ct and Net Profit closer to $60Mil. Perhaps too optimistic?

I have cortina but not THG. Not sure how high both counters can climb. Both are extremely undervalued base on earnings and dividend (more so for Cortina). They can afford to give more dividend. My only concern is with a these Reits taking over property and raising rent and hopefully IR continue to bring in customers that love watches. THG sale is mostly Spore?, whereas for Cortina - they have been smart to move to Taiwan.

Sporean by nature are traders and these two counters represent reputation of SPore in the retail trade. Wait for pull back to put some CPF money in THG. CPF money interest is too low and riskiest if not compensated for inflation. At least invest some in dividend yielding Co. that have strong earnings prove safer.

ME LIKE THE REST OF YOU GUYS HERE - Change camp after trading in and out and lossing a great deal of patience & $$$ decided to move here and exchange value investing. Not so easy but at least they are steadily supported by dividend yield beating banks... I think the market will in time appreciate this kind of Co.

How to opt for scrip dividend - is it better than taking cash?

(15-03-2012, 03:37 PM)ValueBeliever Wrote: I have cortina but not THG. Not sure how high both counters can climb. Both are extremely undervalued base on earnings and dividend (more so for Cortina). They can afford to give more dividend. My only concern is with a these Reits taking over property and raising rent and hopefully IR continue to bring in customers that love watches. THG sale is mostly Spore?, whereas for Cortina - they have been smart to move to Taiwan.

Sporean by nature are traders and these two counters represent reputation of SPore in the retail trade. Wait for pull back to put some CPF money in THG. CPF money interest is too low and riskiest if not compensated for inflation. At least invest some in dividend yielding Co. that have strong earnings prove safer.

ME LIKE THE REST OF YOU GUYS HERE - Change camp after trading in and out and lossing a great deal of patience & $$$ decided to move here and exchange value investing. Not so easy but at least they are steadily supported by dividend yield beating banks... I think the market will in time appreciate this kind of Co.

How to opt for scrip dividend - is it better than taking cash?

I will choose THG over Cortina due to the higher margin that THG has over Cortina - 8% as compared to 4%.

While THG has a significant base over in Singapore, a significant of the revenue comes from Hong Kong, Thailand, Japan, Malaysia and Australia.

The interesting thing about THG is that it has in hand numerous freehold shops that has already been paid for. 3 in Singapore, 4 in australia, 1 in Malaysia and 1 in Hong Kong of which the 1 at centrepoint has unexpired lease of 62 years while the one in Hong Kong has 852 years and the rest are all freehold.

Its main office at Tong Building is currently being valued at 7.6m, unchanged from its Annual report since 2001. I have estimated this freehold office unit to be worth at least 15m, using comparable sale at Tong building. Of course, this piece of property is unlikely to be unlocked given that they will have to rent another place if they want to rent or sell it out. Another undervalued unit will be the one in Malaysia. Cortina, however only has $2.6m worth of freehold premise at hand .

And it also has a $1.2m stake in Gems Tv which has already been significantly written off. However, Gems Tv has pull out of its business, pour its money to help restructure its competitor Jewelry TV, and now JTV is preparing to be listed. This will be able to unlock value from this flawed investment, which has been a negative regarding the management. Currently, Gems TV is no longer operating its business and is filled with cash and asset thus no further downside should be expected.

(vested)

When I compare the 2, it is very clear to me THG beats Cortina in all important financial measurements and quality aspects. THG's shops look much better, and most of them are very strategically located. Their sales staff are very experienced. THG has reported consistently higher operating margins at GP, OP, and PBT levels, than Cortina. In the all-important measurement of inventory turnover on sales, I think THG has set a high standard for other players to try to match.

I am impressed by shanrui_91, who at only 20 years old has understood and unraveled the additional value hidden in THG's retail/office properties, which are recorded in the B/S at either historical cost or conservative valuation. Of course, we must not forget that THG always has a net cash reserve. All these make each THG share that much more valuable than its reported NAV, and investing in it that much more safer.

thanks for the compliment, I do have a vested interest anyway. but i have similar question about scrip dividend, how do i sell the odd lots if i subscribe to the scrip?

(15-03-2012, 10:57 PM)shanrui_91 Wrote: thanks for the compliment, I do have a vested interest anyway. but i have similar question about scrip dividend, how do i sell the odd lots if i subscribe to the scrip?

In the odd lots market. It's a separate market where you can queue shares in less than 1 lot (i.e. 1,000 shares). Most trading platforms have such a feature - but check with your remisier if you are unsure.

(15-03-2012, 09:02 PM)shanrui_91 Wrote: I will choose THG over Cortina due to the higher margin that THG has over Cortina - 8% as compared to 4%.

Had a quick look at Cortina's latest financials. Besides the lower NPM, another turn-off for me is their high Debts = $77Mil vs Cash = $13Mil. In comparison, The Hour Glass has Debts = $32.8M and Cash which is almost twice Debts.

Note that the above is just my personal preference.