The Hour Glass

[opmi]

Maybe VBs here can help my question:

Do Watch Distributors have annual quotas from Watch Manufacturers as part of their distributorship agreement?
E.g. THG must buy X amount from Rolex every year whether they can sell or not.

Thanks

[brattzz]

Maybe VB here can help my question:

Does Watch Distributors have annual quotas from Watch Manufacturers as part of their distributorship agreement?
E.g. THG must buy X amount from Rolex every year whether they can sell or not.

Thanks

economy of scale sir, i would say it’s a yes! biz wise and relationships wise! 👍 being retailers and not producers, not much choice there! 🧐

[weijian]

@Karlmarx, thanks for the summary of the cashflow. It is illuminating. It reminds me of how Boon presents his analysis on VB at times. I think i found a new way which is to do a first pass analysis by summarizing its cashflow usage to understand a business at the start of any equity analysis. Imitation is the best form of flattery i presume.

@brattzz, with regards to LVMH buying HourGlass, i took a look at the possibility:
- LVMH has a private equity arm setup some time ago. It is now called L Catteron. They bought a partial stake in Sincere Watch a couple of years back but from their website, they seemed to have divested it.
- L Catteron seems to be more interested to taking partial stakes. They follow the traditional PE method with allowing the founder to continue to do their magic, while they try to give provide synergistic opportunities through their brand network. One might ponder whether LVMH did check up on Hour Glass before it went for Sincere Watch but even so, any offer by HourGlass probably will not be extended to minorities i believe.

http://www.lcattertonasia.com/Brands.htm...ent/R:Asia

[dydx]

Don't just look at THG's financial numbers and spend too much time crunching them, as the business is really about the stores - where they are located, and what distinguish them from the competition, including their sales professionals - and what brands of watches are represented by THG and carried in the stores, and also about the company's website as a proactive marketing channel to promote certain brands and their stories, as well as the hobby of collecting branded watches for those who can afford it.

Do spend some time on this article from THG's website about the brand Ulysse Nardin and its "Freak" watch, and you would know better what I mean...
https://www.thehourglass.com/cultural-pe...din-freak/

As proven by its long track record of 30 years since IPO in 1989 and especially the last 10 years, there is little doubt THG's business is very well positioned for further growth and delivering superior profitability.

[karlmarx]

Most of the issues being discussed over the past few days have actually been a recurring topic of THG over the past few years. Low P/E valuation, low payout ratio, and high inventory level. Some of the rebuttals to my recent posts were made by contributors who actually came to the same conclusion as I have on the issues surrounding THG, 7 years ago, but now appear ignorant of them. But for the most part, it never occurred to the contributors -- at least not stated publicly -- that THG's market price never strayed too far from its book value, and a dividend yield of about 4%. I will recommend new-to-THG (prospective) shareholders to read the entire 97 page thread.

@weijian, I learnt the bulk of what I now know from 3 men, and one of them is from VB. So I suppose it is fair to return the favour, and continue the spirit of generous sharing, though it comes at some cost.

@dydx, there is no doubt that THG is a lot more than what it appear on financial statements; such as the broad aspects/qualities which you have mentioned. Yet, at the same time, the financial statements/results of THG is a reflection of its qualities. A business with fine qualities will produce good numbers.

@Shiyi, the answers which you are looking for can be found in the earlier part of this thread. Tay wants to consolidate the market (for reasons I have mentioned) but Cortina was unwilling (possibly also for reasons I have mentioned). Tay was not welcome in Cortina.

[Scg8866t]

Just curious why not buy into oriental watch(00398) since luxury watch distributors are commoditised. Both have the same trinity brand dealerships(Rolex, Patek, AP). But oriental watch has more cash per share, stronger consistent fcf and a much larger discount to nta. OW is also more exposed to where the money is(China)

ADs are fully controlled by the watch brands. These watch brands control the supply and the price to generate hype and price appreciation. A rolex Daytona 116500LN cost 16.6k in THG but more than double in the grey market. No one goes to AD to buy sports model anymore, all buying via second hand shops or carousell. Because you can never get rolex sports model or anything valuable or indemand there. Profits are disproportionately transferred to used watch biz owners. Own view.

[cyclone]

Proposed Acquisition of A Property in Brisbane, Australia

The Hour Glass Limited announced that The Hour Glass (Australia) Pty Ltd ("THGA"), a wholly-owned subsidiary of the Company, had entered into a sale and purchase agreement with 190 Edward St Pty Ltd as trustee for BAMPS Trust (as vendor) for the acquisition by THGA of the freehold property located at 190 Edward Street, Brisbane, in Australia.

The Property is an eight-storey retail and commercial office building occupying a site area of approximating 455 sqm, within the main luxury retail precinct in the heart of Brisbane’s central business district.

The Property has a gross lettable area of 2,521 sqm (approximately 27,136 sft). The Property has a retail tenant occupying its ground floor and seven levels of commercial office with multiple tenant layouts.

The consideration for the purchase of the Property is A$32.0 million (approximately S$30.3 million).

The acquisition of the Property is consistent with the Group’s preferred business model of operating within its directly owned property assets. Identifying and acquiring prime luxury retail premises in choice locations where the Group operates provides security of tenure.

The Property will further strengthen the Group’s retail footprint in Australia.

More details in https://links.sgx.com/FileOpen/THG_Prope...eID=567054

[brattzz]

Wonder how many properties does THG owns and is paying rents to themselves? 👍

[dydx]

Wonder how many properties does THG owns and is paying rents to themselves? 👍

Apart from the new shop/office building at 190 Edward Street, Brisbane, being purchased, THG owns mostly freehold shop/office properties in Singapore (Tong Building, Centrepoint on Orchard Rd; Peninsular Plaza on North Bridge Rd), Sydney, Melbourne, Brisbane, Hong Kong, and Kuala Lumpur, and over 6,000 sq.ft. of warehouse space in Eunos Warehouse Complex at Kaki Bukit Rd 2, Singapore. Full details of the properties - carried in the B/S in either historical cost or professional valuation, depending on whether the properties are for own use or investment (i.e. leased out) - are available in Notes 12 & 13 (p73 to p77) in the latest FY19 AR...

https://links.sgx.com/FileOpen/THG_Annua...eID=568093

As at 31Mar19, total carrying BV (less accumulated depreciation) of all properties stood at $98.9m. It does appear there is quite a bit of hidden reserve value in those properties now held for own use which are carried in the B/S at historical cost.

[MOV]

THG just released their Annual Report 2019 last week. As always, very well-written insights from Chairman. 


Some excerpts..

Asian Demand
....Looking forward, whilst we expect continuing geopolitical tensions and volatile stock markets, and so anticipate an overall deceleration in the growth of Swiss watch exports to approximately 3% for 2019, all major watch producers realise that Asian demand will remain the key driver of growth for the next decade and beyond. In response, they are deliberately channelling merchandise to the countries where true demand originates. Where we sit, so long as we continue to collaborate with the right partners, we are cautiously optimistic the ensuing years will bode well for the Group.

Digitisation
....In other words, what customers desire is information online and shopping offline. This fact is evidenced by the recent news of the world’s largest online watch resource Hodinkee announcing its entry into traditional bricks and mortar retailing. It demonstrates that even with the largest and most captive watch audience in the world, there is a cap to the potential of pure-play e-commerce, and growing beyond a niche requires a physical space.

Retail
...Underlining our view that retail is still important, the value we can add as a specialist luxury watch retailer is our expertise and ability to create physical environments where consumers can engage with a human being. We seek to contextualise the wristwatch across different universes and hence, have developed differentiated retail experiences with our thematic salons.