The Hour Glass

[cyclone]

Financial Results for the Financial Year Ended 31 March 2018

Highlights :
1. Year-on-year revenue remained steady at S$691.6 million
2. Group’s FY2018 gross margin of 24.2% (FY2017: 22.7%)
3. Profit after tax rose by 2% to S$50.725 million
4. Cash and cash equivalents at S$180.5 million
5. Net asset value per share was S$0.72 as at 31 March 2018
5. Proposed first and final dividend of S$0.02 per share.

More details in :
1. http://infopub.sgx.com/FileOpen/THGL_4Q_...eID=506852
2. http://infopub.sgx.com/FileOpen/THG_GP_F...eID=506853

The Hour Glass today closed at S$0.655.

[dydx]

With FY18's EPS of $0.0707 and the latest 31Mar18 NAV/share at $0.72, I wonder why Mr Market would support THG - a well-managed business and a steady profit generator - at only $0.67 (last done share price yesterday, 25May18).

Wouldn't it be more rational for Mr Market to price THG at its latest NAV/share plus a premium of say at least 2 years of forward EPS (or simply the latest full-year EPS)?

We should bear in mind that as at 31Mar18, THG held a huge net cash reserve of $130.8m, which is equivalent to $0.185/share. We should also bear in mind that inside THG's B/S lies quite a large hidden reserve in its property holdings (including those captured under PPE) which should give a few cents of extra value.

[Choon]

With FY18's EPS of $0.0707 and the latest 31Mar18 NAV/share at $0.72, I wonder why Mr Market would support THG - a well-managed business and a steady profit generator - at only $0.67 (last done share price yesterday, 25May18).

Wouldn't it be more rational for Mr Market to price THG at its latest NAV/share plus a premium of say at least 2 years of forward EPS (or simply the latest full-year EPS)?

We should bear in mind that as at 31Mar18, THG held a huge net cash reserve of $130.8m, which is equivalent to $0.185/share. We should also bear in mind that inside THG's B/S lies quite a large hidden reserve in its property holdings (including those captured under PPE) which should give a few cents of extra value.

Overall, I also think the share price is cheap (considering THG being well-managed and steady performer and the untapped value on its balance sheet). 

But I find the full year results disappointing. 
- For 9MFY2018, revenue was +3%yoy;
- For 12MFY2018, revenue was -1%yoy.
Yet when you look at the three months period of Jan-Mar2018,
- Changi Airport visitor arrivals was strong;
- Genting Singapore performance was strong;
- Swiss watch exports to Singapore was strong.

I asked at last year's AGM why is the company keeping so much cash (S$125mn), alluding that THG should increase dividends, as the company has already completed a multi-year expansion phase. Mgmt replied simply that they prefer to keep powder dry. Now the cash position has increase to (S$180mn). How much dry powder does the company need? 

In my view, THG should increase its dividend to reward shareholders. In the previous expansion phase, when the company was opening new shops and have to stock up inventory, free cash flow was weak, so a low dividend payout of ~30% relative to earnings is understandable. In the past two years, finally free cash flow was strong. Yet the payout is still maintained at ~30%.

My only axe to grind with THG/management is its low dividend payout despite healthy cash flow and huge cash position.

[dydx]

FY18 AR just out....
http://infopub.sgx.com/FileOpen/THG_Annu...eID=516083

[ksir]

FY18 AR just out....
http://infopub.sgx.com/FileOpen/THG_Annu...eID=516083

Interesting insights in how to anticipate disruption.
An iconoclast path taken with focusing on their services and social aspect with customer instead of expanding the channel and to appeal to masses!
This to me suggest their focus on their value proposition. Well done so far except that the result is obviously too early to tell.

Keen to embark in their journey with a ticket in hand. Although I am not that confident with the certainty of the strategy.

<vested>

[AQ.]

Indeed it's always a pleasure to read THG's AR. Tay does takes the effort to shed more light on the industry in contrast with the cookie-cutter full-of-motherhood-statement versions from other listcos.
Sounds less pessimistic vs previous yrs i think. Swiss export nos also look better with chinese spending again.

I have purchased more shares @63c this mng.

Overall decent value @ these lvls i reckon.

[Choon]

Any thoughts on the founder privatizing the company at current low valuation especially since there is so much cash in the company?

[crabcrab]

The Hour Glass ($0.62) - Having read the latest THG annual report, the only explanations for the low market valuation are perhaps poor marke sentiment and share liquidity. 🙂

[pacyfiq]

The Hour Glass ($0.62) - Having read the latest THG annual report, the only explanations for the low market valuation are perhaps poor marke sentiment and share liquidity. 🙂

Like the management, the cash position and the spirit behind the company. Wish a dividend increase for 2019 also. I want to ask if some of you are clients of The Hour Glass and what is your experience with them?

[Wildreamz]

Asset value, and multiples relative to earnings are reasonable. Earning pressure from ecommerce disruption (people buying online, searching online for best price around the world) alleviated somewhat (I think earnings have reached a steady state). I think this counter may have a place in defensive portfolios.

That said, smart wearables (e.g. Apple Watch) continues to gain steam (Apple Watch ~50% growth in mainland China, their supposed "weakest" market). This should start to apply pressure on the luxury watch market I suppose. 

Does THG have a strategy for this trend?