The Hour Glass

[dydx]

I think the most important cues have to be from THG's corporate actions or the Tay Family's transactions. By paying close to $2.00/share in the latest (10Dec21) share buyback which is a large one (822,700 shares), THG's management/EDs should have the support of the entire BOD. The purchase may have a bearing on the Tay Family's controlling majority interest and what Dr Henry Tay may be contemplating, including future growth plans for the business and his family's desired ownership and the most appropriate shareholding structure for THG.

[weijian]

THG just spent 1.6mil to buy back shares at close ~2.00sgd. At this price, this would been close to 2x NAV!

Based on what has been espoused in the AGM just 5 months ago, it seems like the Tay family believes that beyond the brick and mortar and inventories, their relationships and business know-hows are also worth as much!

https://links.sgx.com/1.0.0/corporate-an...410be55083

In my view, NAV is not a suitable valuation metric for THG. Say today's NAV is $100 and say THG has demonstrated a durable ROE of 10% - that means that in 3 years time, THG's NAV would be about $120 (assume pay out some dividends during the 3 years). Historically THG has always been profitable. 

So if there is a high probability that THG would have a NAV of $120 in 3 years time, would one still be willing to pay only 1xNAV or $100 today? Or would one come to the realisation that depending on the quality and growth prospects of the company, the fair P/NAV could be 1.2X or 1.5X or 4X? Then since it is going to be a subjective multiple, then why not use PE? At least the PE valuation metric is closer and can be compared to opportunity cost and it is also more sensitive (E being smaller than NAV).  

By a simple annualising of the recent half year results, net profit for FY22 would be $126M (wow !!!). At $2.10, I estimate that would be about 11xPE. Not exactly distressed or very cheap. But I think fairly cheap.

I estimate Watches of Switzerland is about 36xPE. Overhyped in my view.

SIA and SATS are 20X and 18X respectively (based on pre-COVID earnings level, even though there is no certainty when earnings would ever recover to those levels). In my view, an irrational trust and confidence in Temasek companies.

hi Choon,
The way you describe "NAV is $100 and based on ROE = 10%, 3 years later it would be about $120" is akin to DCF (Discounted Cash Flow) valuation which takes into account of the time value of money and then discounted accordingly. It is totally different from "NAV valuation", if there were one.

The principle of my valuation is actually "replacement cost" (ie. how much money it takes to replicate the same business). NAV is just the metric I conveniently use. It is convenient because the inventories are straightforward (at cost), the investment properties are valued yearly and retail outlet renovations are amortized on the PPE level - Therefore, the NAV is pretty reflective on the tangible asset required to be replicated. The harder part is the intangible portion - which are the customer lists, having the privilege to dine with the scions of the Rolex/PP/AP families and the "1500+ Google reviews for each THG store".

So NAV is just a method one use. P/E itself is another method. The key is the principle. We have to guard against the syndrome of "To the man with a hammer, everything looks like a nail".

P.S. Quick note on SIA/SATS: They are "valued highly" not because of "irrational trust and confidence in Temasek companies". Market isn't exactly irrational because some of these companies hold pretty dominant moats on a local basis and the Spore Gov is ready to bail them out with advantageous conditions (eg. DBS takeover of POSB and MCB issue for SIA). There are other local companies in Temasek's stable whom have to compete on an international basis and you wouldn't see such valuations! (eg. Sembcorp)

[brattzz]

I think the most important cues have to be from THG's corporate actions or the Tay Family's transactions. By paying close to $2.00/share in the latest (10Dec21) share buyback which is a large one (822,700 shares), THG's management/EDs should have the support of the entire BOD. The purchase may have a bearing on the Tay Family's controlling majority interest and what Dr Henry Tay may be contemplating, including future growth plans for the business and his family's desired ownership and the most appropriate shareholding structure for THG.

THG continue buy-back sir,

@ SGD1.98,

continuous show of action, good dividends expected?!

[shadow_walker]

Made a trip to the boutique and was surprised to find that none of the rolex on display is for sale. Not even the diamond datejust in any sizes. Not sure if this is the same for all boutiques, but the inventory turn is really high if that is the case

[brattzz]

Made a trip to the boutique and was surprised to find that none of the rolex on display is for sale. Not even the diamond datejust in any sizes. Not sure if this is the same for all boutiques, but the inventory turn is really high if that is the case

really strange huh... a watch store with no watches to sell? 
or in order to buy that rolex watch, you need to buy another 1-2 watches first? :O

now that's food for thought...this luxury watch biz model confuses me...

Mmmmm.... :O

[brattzz]

https://www.businesstimes.com.sg/opinion...rmaKa-qqbA

WATCH retailers Cortina Holdings and The Hour Glass both clocked substantial improvements in revenue and net profit in their latest financial results.

The Hour Glass's revenue rose by 63 per cent to S$472.4 million and earnings surged 110 per cent to S$62.6 million in the half year to September.

Its rival Cortina Holdings reported an 86.7 per cent jump in revenue to S$324.6 million, while net profit improved by 74 per cent to S$25.4 million.

Higher revenue and gross margins of about 30 per cent were factors that contributed to the better performance of the retailers.

Notably, it was stated in the financial reports that the businesses of the two retailers were...

[shadow_walker]

Happy New Year! 2022 is here and Rolex has raised prices as usual. Price for most Rolex watches has gone up by more than 3%. Price for sport watches such as Sub, GMT and Daytona is now 10% higher than a day ago. A daytona costs 20k from THG now

https://www.rolex.com/watches/cosmograph...-0002.html

[crabcrab]

<THE HOUR GLASS - $2.40> Traditionally, THG results for the 2nd half tend to surpass that of the 1st half. It won't be surprising that the Full Year result thsi year could be in the range of $125 - $150 mil this year. Bonus dividend may also be expected?

[brattzz]

<THE HOUR GLASS - $2.40> Traditionally, THG results for the 2nd half tend to surpass that of the 1st half. It won't be surprising that the Full Year result thsi year could be in the range of $125 - $150 mil this year. Bonus dividend may also be expected?

I hope so but i am not holding my breath, THG paid up to $2.32/share in their recent share buybacks, 

FMR sold until they are left with <7%....

Any bonus dividends declared will push the price higher and cost more for THG to buy back!

but i do hope i am wrong! any BIG bonus dividends are welcome!

[Choon]

New holding company structure. Could there be any significant implication?

Yesterday's major share buyback of about 2M shares at a record high price was apparently made to cross the line. Perhaps company has a timeline / plan to meet.

Given that there are recent analyst initiation reports, I would think there would be some follow-up / speculation / discussion of this news.

"The Company wishes to announce that following upon settlement of the above market purchase taking
place, the shareholding percentage of TYC Investment Pte Ltd (“TYC”), the Company’s single largest
shareholder, will cross 50% of the total issued Shares (excluding treasury shares). TYC will accordingly
become the immediate and ultimate holding company of the Company, and companies in the Group
(including the Company) will become subsidiaries of TYC. Based on the T+2 settlement cycle for
securities trades executed on the SGX-ST, this would take place on 22 April 2022."