The Hour Glass

[edragon]

Stocks of swiss watches worth a lot more as SNB removes $EURCHF floor, sets deposit rate at -0.75%.

No one is going to buy anything for the next few mth if they raise price overnight.
Swatch grp drop 16.5% as of now!

If THG don't raise price, their current stocks will be sold out very quickly. New stocks will be based on new exchange rate much higher. Wonder what would be THG share price tomorrow, up or down due to this unexpected event.

High chance THG will increase price.
From what i observed now, those parallel importers still have not increase price yet. My advice to those who wants to buy a rolex watch, better go buy one the next few days from them before they realise what happen and increase their price. In the long term it will only going to get more expensive.

Before CHF/SGD = 1.3040
Now CHF/SGD =1.5600

About 20% increase.

[dydx]

How would the 20% increase in CHF/SGD parity this morning affect THG's business volume in the short-to-medium term? I guess:
(1) Those who intend and can afford - including many who have just received a nice year-end bonus - to buy a nice Swiss watch would be motivated to do so soon and more willing to let go their money, for fear of a price increase. Those who intend to buy their watches from Switzerland while on holiday or business would rather buy them quickly in Asia. So the net effect is that THG will likely do more business in the short term at better margins selling from its existing stocks.

(2) Going forward, in response to the negative impact of a higher CHF on Swiss exports, principals/owners of the Swiss watch will likely have to lower their CHF-denominated selling/export prices in the short-term, and the smart buyers/importers who have more financial flexibility like THG will know how to take advantage of the situation to selectively add to their inventory.

(3) After Swiss watch retail prices across markets have stabilised likely at a higher equivalent level in the next few months, there could be a dip in demand/volume transacted for a while, but longer term demand should revert to a normal upward trend.

[brattzz]

buy the co., not the watch!

[edragon]

buy the co., not the watch!

Yeah, the swiss played dirty, very dirty but THG got 20% extra profit on existing stocks without lifting a finger.

Those HN who recently switched from Swiss accounts to S'pore accounts missed the 20% unlocking of value to depositors. Who?

[crabcrab]

Any impact of Swiss Franc revaluation on THG?? My guess is that impact on inventory revaluation on existing stocks, cost of goods sold likely to be higher following the needs to replenish fresh stocks. Foreign exchange gain/loss if any?... Higher selling price on luxury goods not necessary translated to lower sales. Instead, it may have created short term demand for many are likely not to wait for the price to rise.. :0

[edragon]

Rolexes snapped up in Singapore before prices climb LINK

[dydx]

Rolexes snapped up in Singapore before prices climb LINK

As expected, those watch retailers who can financially afford to carry a large inventory of Swiss watches and replenish their stocks quickly by paying cash if need be, would be in a good position to take advantage of the increase in consumer demand for Swiss watches in the short term, driven by the recent sudden sharp rise of the CHF.

[lkw175]

Interestingly, Cortina isn't as popular as compared to THG.

Any thoughts to share?

Many Thanks.

[psolhawk]

Rolexes snapped up in Singapore before prices climb LINK

As expected, those watch retailers who can financially afford to carry a large inventory of Swiss watches and replenish their stocks quickly by paying cash if need be, would be in a good position to take advantage of the increase in consumer demand for Swiss watches in the short term, driven by the recent sudden sharp rise of the CHF.

I do wonder if demand will drop drastically when THG starts selling the new inventory at 20% higher price. Can the regular buyers of such luxury watch comment? Does demand never falter despite increasing prices?

[brattzz]

http://www.remisiers.org/cms_images/Rese..._Glass.pdf

INVESTMENT HIGHLIGHTS
• With over 30 years of operational history, THG is a leading premier luxury watch
retailer with more than 30 boutiques across Asia. It carries over 50 internationally
renowned luxury watch brands and has primary dealerships with Rolex, Patek
Philippe and Hublot.
• Established earnings track record. Leveraging on its experienced management,
THG recorded an impressive revenue CAGR of 7.9% from 2004 to 2014 with a
corresponding 24% CAGR for its adjusted net profit of S$54.9m. The number of
boutiques under THG grew from 17 outlets in FY04 to 26 as of FY14. (Excluding
stores from its Thai associate and new acquisition of Watches of Switzerland)
• Strong free cash flow generation. Due to the nature of its business, THG has
been generating positive free cash flow for the last 10 years, underpinning its ability
to consistently pay out dividends.
• Strong net cash position. As a result of its strong cash flow generation, THG has
also traditionally maintained a very strong balance sheet. As at 30 Sep 14, THG has
a net cash position of S$46.6m (S$0.066/share).
• Expanding through M&As. With its strong cash position, THG has been able to
slowly expand its operations through M&As. In Oct 14, THG announced its
acquisition of Watches of Switzerland, an established watch retailer in Singapore for
S$13.3m, in line with THG’s plan to tap into the suburban retail landscape and
extend into the prestige watch segment. The group also acquired a freehold retail
and commercial property at the heart of Sydney’s CBD area for A$32.8m (S$36.9m)
in Oct 14 with an aim to strengthen its retail footprint in Australia.
• A challenging industry outlook. THG’s outlook remains challenging with China
reporting 3Q14 GDP growth of 7.3%, the slowest since the 2009 global financial
crisis. As a luxury good retailer, THG is highly reliant on discretionary spending of
consumers which is dependent on the level of disposable income, the macroeconomic
environment and consumer sentiments. Despite the slowdown in China,
THG’s profit has remained relatively flat for FY13 and FY14, supported by stringent
cost control measures and management’s prudent approach in reducing emphasis
in the China market. Chinese customers contribute to about 20% of the THG’s direct
sales.
• Our view. THG has consistently outperformed the market, returning +18% vs FSSTI
+5.5% in 2014. Despite being in a cyclical industry, THG has displayed its ability to
consistently maintain profitability by effectively managing costs and store
expansions. While we like THG for its experienced management, strong cashflow
generation and robust balance sheet, we are also cautious on the challenging
macro-economic landscape, and will monitor the stock in our watch list in the mean
time.