The Hour Glass

[karlmarx]

Luxury is an evergreen industry with high barriers. So companies like THG -- or better yet, the brands they distribute -- should always be on the radar of investors for the opportunity to acquire them cheaply.

The pandemic crash of 2020 was unlike any other and luxury has done surprisingly well. With the resumption of travel in the next 1-2 years, I am also inclined to think that their results will be more so-so than spectacular. Things are slowly going back to normal. But of course, it won't be the same.

THG has a successor so investors can be somewhat assured that the magic of TYC will continue for the next 10-20 years.

But at current stock prices (about 2x p/b), THG does not look undervalued to me. Its access to brands is its biggest (and possibly only) moat. And luxury purveyors need not worry about raising their selling prices. But it is, after all, still a brick-and-mortar retailer, and that puts some limitation on the markets it can expand into.

[dydx]

Do you guys know THG has started active marketing of Tudor watches - a sister line of Rolex - on their official website at competitive fixed prices...
https://www.thehourglass.com/catalog/tud...ble-online

For some Tudor models, you can simply buy them on-line, pay for it, and have the watches delivered to a Singapore address FOC, or alternatively you can choose to pick up the watches from one of THG boutiques of your choice. For other Tudor models, you can register your interest on-line and indicate a country and a THG boutique of your choice to visit and inspect the watch, before buying. Rather powerful and flexible e-marketing strategy I think!

THG has no disadvantage as a brick-and-mortar business if customers continue to visit the boutiques to choose and buy their watches, and most of them are happy to award them '5-star' ratings on their Google reviews. Just take a look at the >1500 mostly '5-star' Google reviews on just one boutique - THG Malmaison..
https://g.page/thehourglass-malmaison?share

[Wildreamz]

To be honest, Google reviews does not say much to most experienced online shoppers, who know that fake reviews, or reviews incentivized by "kickbacks" are rampant. I browsed through the Google Reviews of The Hour Glass, seems like almost all of them follow through a standard format of "I was served by (full name of staff). Excellent service.." etc.

Reference: https://www.reputationdefender.com/blog/...le-reviews

Going to Google Maps to leave Google reviews intentionally is in and of itself very uncommon (except for complaints or truly extraordinary service encountered) and likely to draw suspicion; let alone 1500+ reviews for a single store. Not alleging any wrongdoings or anything with absolute certainty, just offering an observer's perspective. 

Peace. 2c.

(ex investor)

[dydx]

To be honest, Google reviews does not say much to most experienced online shoppers, who know that fake reviews, or reviews incentivized by "kickbacks" are rampant. I browsed through the Google Reviews of The Hour Glass, seems like almost all of them follow through a standard format of "I was served by (full name of staff). Excellent service.." etc.

You actually doubt an official distributor of venerable Rolex and Patek, even when there are more than 1,500 reviews from distinct Google account holders, and some of them wrote in foreign languages, at length about their positive buying experiences, and even posted photos of the watches they have bought. Let's be more objective here, and those unsure can always visit the shop to do your own smart investigations by talking to the professional staff there.

Do note such positive reviews are not the same across other overseas THG boutiques though. Take a good look at the Google reviews of THG Sydney..
https://g.page/thehourglass-sydney?share

So I believe the better product and customer handling trainings and working experience of the sales staff manning THG boutiques do have a bearing on customer experience and reviews.

[Choon]

To be honest, Google reviews does not say much to most experienced online shoppers, who know that fake reviews, or reviews incentivized by "kickbacks" are rampant. I browsed through the Google Reviews of The Hour Glass, seems like almost all of them follow through a standard format of "I was served by (full name of staff). Excellent service.." etc.

You actually doubt an official distributor of venerable Rolex and Patek, even when there are more than 1,500 reviews from distinct Google account holders, and some of them wrote in foreign languages, at length about their positive buying experiences, and even posted photos of the watches they have bought. Let's be more objective here, and those unsure can always visit the shop to do your own smart investigations by talking to the professional staff there.

Do note such positive reviews are not the same across other overseas THG boutiques though. Take a good look at the Google reviews of THG Sydney..
https://g.page/thehourglass-sydney?share

So I believe the better product and customer handling trainings and working experience of the sales staff manning THG boutiques do have a bearing on customer experience and reviews.

I am guessing that:
1) Reviews have been set as a KPI;
2) Associates strongly request customers to provide reviews;
3) Customers in consideration of the importance of maintaining a positive r/s with associates file their reviews. 

So the service may be truly great and the reviews may be true but do the reviews come 100% voluntarily from the heart. I doubt so. And this I feel is unhealthy and should be watched by management - a 'compulsion/pressure' for customers to leave review may make customers feel tired over time, a KPI that can be gamed may also frustrate some genuine associates who does not burden customers to leave reviews.

On a more major point, in the near-term (say one year), I think what would further propel the share price is whether liquidity will continue to flow to the stock and not how much the quality/prospects would further improve. Quality/prospects are already apparent. I am wondering with the recent run-up in price and volume, would the stock manage to find its way into some indices. And would this attract even more liquidity leading to a higher PE ratio (say between 15-0X). Watches of Switzerland on the LSE has been trading at ~40-60X PE in the past year. Yet WOS' financial performance, financial standing, and track record is not superior to THG in any way.

[Wildreamz]

Hi Dydx and thanks Choon for chiming-in,

I meant no disrespect for The Hour Glass, just giving my perspective as an observer, what is the perception when I see 1500+ (99% 5 Stars, written in similar formats) reviews on Google Reviews/Google maps.

Here is another tell-tale sign, you can take a look at the number of reviews the reviewers have given, and see what % of them only have 1 or 2 reviews under that account name.

Also, investors can relax. This is just 1 small part of the equation. What's important is forecasting future earnings growth trajectory.

Peace. 2c.

[brattzz]

3 more areas to expand THG's distribution networks, stepping into CTF/CSS's territories...

The Hour Glass (Macau) Limited
The Hour Glass (Taiwan) Limited Company
The Hour Glass (Shanghai) Co., Limited

Principal activities : Retailing and distribution of watches, jewellery and other luxury products

At this juncture, the primary purpose of the incorporations is to enhance the protection of legal trade
names of the Group.

The above transactions are not expected to have a material impact on the net tangible assets and
earnings per share of the Group for the financial year ending 31 March 2022.

[shadow_walker]

It is very normal for customers to give good reviews. Sales associates will ask customers to give reviews and customers will give 5 stars as they hope to get their allocation to the sport watches.

As a buyer of watches, I am confident that THG's margin will continue to expand. In the past, ADs have to give discounts for Rolex watches. Today, the resale value of Rolex is much higher than the RSP, especially for the sport watches. A Daytona is worth 20-30k premium in the resale market compared to the price that customers will purchase from the AD.

In order to have a chance to apply for these sport watches, you have to buy the unwanted watches from the AD. The unwanted watches used to be the Rolex datejust and oyster perpetual, but today it is no longer possible to buy these watches. Therefore, you have to buy from other non-Rolex brands to be deemed a loyal customer. Non-Rolex brands have much higher margin than Rolex, which is why ADs margin will only expand. If you are not Rolex, Patek, Richard Mille, AP, you can only rely on the ADs. Revenue growth might not be very impressive, but the margin expansion is huge from the change in mix. Recently, I have observed that non-Rolex shelf is getting empty too and this is a sign of the demand.

https://www.rolex.com/rolex-dealers/sing...#mode=list THG is the biggest distributor of Rolex in SG. The shortage in Rolex has benefitted Rolex, ADs, 2nd hand dealer and customers. Everybody wins other than people who are new to Rolex. Will secondary prices for Rolex ever fall? Nobody knows unless perhaps in a global economic crisis. But certainly not in an environment where many got very rich from the markets, properties and crypto.

[Choon]

It is very normal for customers to give good reviews. Sales associates will ask customers to give reviews and customers will give 5 stars as they hope to get their allocation to the sport watches.

As a buyer of watches, I am confident that THG's margin will continue to expand. In the past, ADs have to give discounts for Rolex watches. Today, the resale value of Rolex is much higher than the RSP, especially for the sport watches. A Daytona is worth 20-30k premium in the resale market compared to the price that customers will purchase from the AD.

In order to have a chance to apply for these sport watches, you have to buy the unwanted watches from the AD. The unwanted watches used to be the Rolex datejust and oyster perpetual, but today it is no longer possible to buy these watches. Therefore, you have to buy from other non-Rolex brands to be deemed a loyal customer. Non-Rolex brands have much higher margin than Rolex, which is why ADs margin will only expand. If you are not Rolex, Patek, Richard Mille, AP, you can only rely on the ADs. Revenue growth might not be very impressive, but the margin expansion is huge from the change in mix. Recently, I have observed that non-Rolex shelf is getting empty too and this is a sign of the demand.

https://www.rolex.com/rolex-dealers/sing...#mode=list THG is the biggest distributor of Rolex in SG. The shortage in Rolex has benefitted Rolex, ADs, 2nd hand dealer and customers. Everybody wins other than people who are new to Rolex. Will secondary prices for Rolex ever fall? Nobody knows unless perhaps in a global economic crisis. But certainly not in an environment where many got very rich from the markets, properties and crypto.

A booming first half for Watches of Switzerland too with sales conditions of the same strength/complexion as described by shadow_walker. 

Observations from WOS 2021H1 results transcripts:

- For the six months ended Oct2021, Watches of Switzerland grew revenue by 45% (vs FY21) and 41%  (vs FY20).
- Absent tourism and airports, almost all of business is from domestic clients in UK and the US, showing thriving domestic markets demand.
- Supply-constrained brands (such as Rolex and PP) accounted for about 60% of revenue.
- Rolex stock became a demonstration stock where customers can only try and register their interest.

[Choon]

It is very normal for customers to give good reviews. Sales associates will ask customers to give reviews and customers will give 5 stars as they hope to get their allocation to the sport watches.

As a buyer of watches, I am confident that THG's margin will continue to expand. In the past, ADs have to give discounts for Rolex watches. Today, the resale value of Rolex is much higher than the RSP, especially for the sport watches. A Daytona is worth 20-30k premium in the resale market compared to the price that customers will purchase from the AD.

In order to have a chance to apply for these sport watches, you have to buy the unwanted watches from the AD. The unwanted watches used to be the Rolex datejust and oyster perpetual, but today it is no longer possible to buy these watches. Therefore, you have to buy from other non-Rolex brands to be deemed a loyal customer. Non-Rolex brands have much higher margin than Rolex, which is why ADs margin will only expand. If you are not Rolex, Patek, Richard Mille, AP, you can only rely on the ADs. Revenue growth might not be very impressive, but the margin expansion is huge from the change in mix. Recently, I have observed that non-Rolex shelf is getting empty too and this is a sign of the demand.

https://www.rolex.com/rolex-dealers/sing...#mode=list THG is the biggest distributor of Rolex in SG. The shortage in Rolex has benefitted Rolex, ADs, 2nd hand dealer and customers. Everybody wins other than people who are new to Rolex. Will secondary prices for Rolex ever fall? Nobody knows unless perhaps in a global economic crisis. But certainly not in an environment where many got very rich from the markets, properties and crypto.

"If you are not Rolex, Patek, Richard Mille, AP, you can only rely on the ADs."


Even if it is a brand with some legacy, class and poise, and retailing in the 5 digits (say F.P. Journe, Ulysse Nardin) - these brands by just themselves are not viable commercially?