The Hour Glass

While I won't say I am 100% sure, however this was the reasoning I came up with for their lumpy changes in working capital. Firstly, it could be due to a growth stock like THG, when they open a new shop, they would have to increase their amount of inventory, resulting in the rise in inventory under changes in working capital. Secondly, watch manufacturers do not produce watches at regular intervals? Correct me if I'm wrong, however, I find these luxury watch manufacturers times the market when releasing batches of watches into the market. Hence, this is the reasons I came up with for the high number for the inventory this recent quarter.

(vested)

(06-08-2014, 10:42 AM)rickytj Wrote: not so good in my opinions:
1) inventories went up by SGD 30.5 mln, a very high number considering a challenging luxury watch environment. What's the reason behind this? is this for the non-watch related businesses?
2) as a result working capital investment was SGD 40.8 mln, almost a record high
3) as a result net cash dropped 43%
4) as a result days of inventory outstanding jumped to 204 days from just 184 days last year.

ability to be profitable is one thing, ability to manage working capital and still generate reasonable cash flow under challenging environment is another thing. I think the later one is more crucial at this moment.

(06-08-2014, 01:14 PM)pacyfiq Wrote: Inventory increased is for the new Rolex and Hublot shops in Bangkok (open in May) in my opinion.

If Thai operation is held under associates, then I think the inventory increased has nothing to do with the new Rolex and Hublot shops opening.

I thought I should share here that those who try very hard to look at quarterly numbers with the view to unravel some special trends or investment strategies on THG could well be missing the boat! Take a good look at THG's 10-year share price chart vs. the STI, and you will know what I mean…..
https://sg.finance.yahoo.com/q/bc?s=E5P....l&c=%5ESTI

Not counting the yearly dividends - which have been in the range of $0.05 to $0.06/share in the last 4 FYs - THG's share price has out-performed the STI by some 1100% or 11.0x in the last 10 years. A simple buy-and-hold strategy for the longer term - to collect the yearly dividends and benefit from the share price going up over time - has worked very well in this case..

(06-08-2014, 02:00 PM)dydx Wrote: I thought I should share here that those who try very hard to look at quarterly numbers with the view to unravel some special trends or investment strategies on THG could well be missing the boat! Take a good look at THG's 10-year share price chart vs. the STI, and you will know what I mean…..
https://sg.finance.yahoo.com/q/bc?s=E5P....l&c=%5ESTI

Not counting the yearly dividends - which have been in the range of $0.05 to $0.06/share in the last 4 FYs - THG's share price has out-performed the STI by some 1100% or 11.0x in the last 10 years. A simple buy-and-hold strategy for the longer term - to collect the yearly dividends and benefit from the share price going up over time - has worked very well in this case..

yes, in hindsight this has been a very good investment.

but we all know that the past by no means represents the future.

the luxury watch industry is evolving and entering a new phase. Between 2000-2012, the global growth for Swiss watch export was 6.3% annually. It has come down to 1-3% in the past 2 years. We can no longer depend on China as their growth has been flattish (and which was not due to temporary reasons but structural reasons such as clampdown on conspicuous spending). Singapore market has probably saturated.

that's the very reason the management ventured into macarons and opened a new enterprise focusing on non-watch, luxury related businesses. However with existing information we can't yet be sure, let alone paint a good picture of what will happen to their bottom lines and cash flow in the future. This uncertainty is a risk yet valuation continues to go up.

There is really no need to look back 10 years, even thought track record is important to assess and confirm the competence, integrity, and drive of THG's present management team headed by Dr Henry Tay, Dr Kenny Chan, and Michael Tay.

I think we can simply look at how the same team has managed the key parameters of the business - rate of revenue growth, profit margins, expenses, and finances - in just the last few years, and the strategic moves for market access and investment in new stores executed in the last year, to have a fair idea on how the business will evolve in the next few years.

Luxury watch sales seen picking up in H2

[SINGAPORE] Local sales of luxury timepieces are likely to repeat last year's pattern: down in the first half and up in the second.

The full-year sales may post growth, as they did in 2013, but the growth is likely to be meagre.

Direct sales figures are unavailable but Swiss watch exports, which account for sales of virtually all luxury timepieces (those in the price range of S$5,000 to over S$1 million) worldwide, provide a good indicator.

And the indication is the sales here fell in the first six months of 2014. Shipments of Swiss watches to Singapore - one of Switzerland's top 10 market for timepieces - dipped 2.0 per cent from a year ago to 515.8 million Swiss francs (S$706.4 million) during that period, according to the Federation of the Swiss Watch Industry.

Chinese tourists, estimated to have spent S$2 of every S$5 tourists spent in Singapore in the first two months of this year, must be one of the main culprits for causing the drop. There were 27 per cent fewer of them visiting Singapore in January to May, the latest tourism figures show.

F J Benjamin, a Singapore distributor of high-end fashion goods, including timepieces by Bell & Ross, Federique Constant and, until recently, Girard Perregaux, specifically blamed China's curb on luxury spendings, along with the Indonesian rupiah's depreciation against the Singapore dollar, for its first quarterly loss since the 2008-09 global financial crisis.

The group made an overall net loss of $5 million in the first three months of 2014, with sales of watches taking a 10 per cent dive in South-east Asia, including Singapore.

Multi-brand retail chain Cortina, which is particularly strong in selling Patek Philippe timepieces, reported its turnover slipped nearly 5 per cent to S$92.1 million in the quarter ending June this year. Net profits fell 9 per cent to S$4.1 million.

The Hour Glass, which operates in nine cities in the Asia-Pacific region, was in a happier state with sales up 2.5 per cent in the same quarter to hit S$158.6 million. But profits before tax slipped a bit from S$11.7 million to S$11.6 million.

Much of the sales increase came from overseas outlets. Still, the retail chain's sales in the last quarter seemed to have a harder climb. And sales for this financial year (ending March 2015) look unlikely to even come near last year's 13 per cent growth.

The Hour Glass' executive director, Michael Tay, who had complained that the past year was "difficult" despite the double-digit growth in his business, expects the rest of 2014 to be "highly volatile and market conditions challenging as exuberant Asian spending on hard luxury is curtailed".

Yet local sales of luxury timepieces are tipped to pick up in the second half of the year, when well-heeled tourists hit town for the F1 race - and doing some shopping on the side - and Christmas and year-end bonus send locals to the malls to spend.

That's apparently what happened last year. Singapore's imports of Swiss watches dropped 2.6 per cent in the first half of 2013 but bounced back in the second half to deliver a one per cent full-year growth, lifting imports to 1.14 billion Swiss francs that year.

Still, there's little joy for luxury watch retailers here who, until recently, were enjoying double-digit jumps in sales. Singapore's imports of Swiss timepieces rose 33.4 per cent in 2010 to 899.3 million Swiss francs, the year after the financial crisis. They increased 27.5 per cent in 2011 to exceed one billion Swiss francs for the first time, before tripping and slipped one per cent in the following year.

Singapore was the only one among the top 10 importers of Swiss watches in 2012 to see a drop in imports.

Local retailers will be less happy when they see retailers in other countries doing better, especially those in countries around Singapore.

Singapore was one of the four top Asian markets that brought in fewer Swiss watches in the first half of this year; the others were China (-4.2 per cent), Taiwan (-2.9 per cent) and Thailand (-9.8 per cent).

Japan and South Korea were the fastest growing markets for Swiss watches in the first six months of 2014, both growing at a 25 per cent-plus clip. Hong Kong, the biggest market, grew 4.4 per cent.

While shipments to Singapore fell, the Federation of the Swiss Watch Industry says Swiss watch exports overall put up a "very favourable" performance in the first half of the year, expanding 3 per cent to 10.53 billion Swiss francs, up from a year ago when they barely moved. And it predicts export growth will speed up in the second half.

With the traditional European and American markets largely still flat, Swiss watch shipments in January-June continued to be driven mainly by Asian markets - though not China, or Singapore.

http://www.businesstimes.com.sg/premium/...2-20140822

The hour glass ($1.80) - Seems that there are still many posts that doubts THG. Allow me to share something here. My initial investment of The Hour Glass started more than several years ago when it was traded at an average of $1.20 per share (before 1 for 1 share split) when the two IRs are still building. And there come 'the great recession', and the share price was traded less than $$0.60 per share at one time. I stick to my belief and held to the shares. I expected a luxury retail boom in Singapore, investment in luxury industry seems to be a sure bet. Many layman investors may not understand the dynamics of ultra luxury sector - whether in good times or recession, ultra luxury sector will remain profitable. THG had well positioned in this sector since. While many buy collectible watches for investment, I choose to buy the watch company.. Another safe bet in Hr Glass is that their inventories (luxury watches) can be used as collateral for pawns and hence has its value even if they dont sell.. So it really doesnt matter as Rolex & Patek Phillipe are in value as goods.. Each year, I attended the AGM to make sure my money is in good hands, and the management style has convinced me.. Conservative, passionate and professional team..

As times go by, history speaks for itself. My initial investment value in THG has tripled ($1.20) then share split 1 for 1, then now $1.80 (aft the split), not factored in the dividend every year I received.. Many did not catch the boat just because they might be in doubt and reluctant to believe. Hence, they never get it started and often miss the greater part of it.. It is never too late to start investing in a good company.. Good luck to all and all the best

I started investing in THG years ago when the share price was below $1.00 (before the 2-for-1 split in FY08), after first observing the beautiful store - recently upgraded by Kingsmen - in Taka SC was doing great business. I added more shares along the way including taking most of the yearly dividends from FY06 to FY11 in scrips, and now I have a small block of shares. It has been a great investment and learning journey for me too!

Instead of the quote by Patek Phillipe, "You don't actually own a Patek Phillipe watch, you are merely looking after it for the next generation". So perhaps, why the shares are thinly traded and tightly held? The very few who knows the company well would probably not selling it in their life time and look after it for their next generation too... & haha, people who own this stock likely are people who got taste

(23-08-2014, 02:53 PM)crabcrab Wrote: Instead of the quote by Patek Phillipe, "You don't actually own a Patek Phillipe watch, you are merely looking after it for the next generation". So perhaps, why the shares are thinly traded and tightly held? The very few who knows the company well would probably not selling it in their life time and look after it for their next generation too... & haha, people who own this stock likely are people who got taste

I am new to the company and also to luxury market. At a glance on previous posts, it should be a worthy company to monitor

But I am always skeptical, when "emotional" value was tagged along with a company.

(not vested)