The Hour Glass

[weijian]

anecdotally seems like more downside to the watch market when youngsters and news cover it

Like crypto, seems like it's the chinese who helped drove up the prices

It is not unfair to look at it this way if maybe we were to try to gauge, where the market is going for the next 24 months. Dr Henry Tay talked about his observation of their clientele getting younger in the last 2 ARs. So I was simply closing the loop over here.

Nonetheless, we have to differentiate between the pre-owned market (eg. what the subdial 50 index at https://beta.subdial.co/market is signalling) and the retailers.

Actually the business of the retailers don't directly benefit from the pre-owned market making new highs. Rather, THG's share price has probably benefited directly instead. But I would rather focus on the business than the price here. Michael Tay has a long runway.

[Choon]

i am quite worried about youngsters spending tens of thousands on watches, but i'm just an old folly...
i rather they spend the money investing in the companies making/selling such products...

youngsters, being young and with their longest run-way, they will have the most fulfillment being value investors then all things else!

It is dependent on their source of money. If youngsters are using their parents' money or from dubious sources, or even getting into debt to spend on their horological hobbies, then there is a cause for concern. It will be unhealthy.

But if their thirst for horology drives them to improve their earning power - whether is it accelerating their careers or creating side hustles, then it would be a great plus. They will need to save to buy these luxury watches and that cultivates a saving habit rather than spending it on merry and drink. As an old folly myself, I know merry/drink would probably be a waste of money but luxury mechanical watches are not. The latter is timeless and are probably great investments if done right, isn't it?

Personally, I think having a "long run-way" is over-rated. Warren Buffett's newspaper boy career and his first pinball machine at 17, is only unique for the Omaha Oracle. He is the Oracle because there are not a lot of people like him. End of the day, different people have different strokes. Different background, different make and different paths. There is no right, and there is no wrong.

Finally, now back to the luxury mechanical watch. This industry is getting more anti-fragile.

(1) Smartwatches are getting the smartphone-only millennials to get used to wearing something on their wrist. They will be ripe as potential customers to sell to when their earning power or interests intersect with horology.

(2) As long as watchmakers remember the 2015 oversupply situation and do not step out of line, focusing on quality over quantity, the long term tail wind from an image-conscious Asian population will allow robust growth.

(2) As long as watchmakers remember the 2015 oversupply situation and do not step out of line, focusing on quality over quantity, the long term tail wind from an image-conscious Asian population (and in general image-consciousness around the world has elevated due to Instagram and the likes)  will allow robust growth.


I would add the words in blue. What do valuebuddies think?

[¯|_(ツ)_/¯]

@choon - not sure about the part on image conscious but these new batch of buyers were driven by the raising prices of the 2nd hand market.  They believed that with the tight (and tighter) supply, and strong demand, it's no brainer to buy and kept these goods as investment.  Flipping at a short time is not desirable but for sure, selling and making $$$ would be the primary objective.

As for the other question on where did they get the $$$? From every where, including from crypto and their hard earn $$$   



Gratitude!

[wj1984]

anecdotally seems like more downside to the watch market when youngsters and news cover it

Like crypto, seems like it's the chinese who helped drove up the prices

It is not unfair to look at it this way if maybe we were to try to gauge, where the market is going for the next 24 months. Dr Henry Tay talked about his observation of their clientele getting younger in the last 2 ARs. So I was simply closing the loop over here.

Nonetheless, we have to differentiate between the pre-owned market (eg. what the subdial 50 index at https://beta.subdial.co/market is signalling) and the retailers.

Actually the business of the retailers don't directly benefit from the pre-owned market making new highs. Rather, THG's share price has probably benefited directly instead. But I would rather focus on the business than the price here. Michael Tay has a long runway.

Sharing some insights because you have been fantastic in sharing!

The retailers do benefit from the pre-owned market making new highs; because when the in-demand watches are making new highs they are able to bundle more to the consumer at the retail shop in order for them to obtain those watches.

eg1. Grey market Daytona 40k SGD, retail price 20k SGD. The bundle would be approximately a 60k watch (with a grey market price of 30k therebouts)

eg2. Grey market Daytona 50k SGD, retail price 20k SGD. The bundle would be approximately a 80k watch (with a grey market price of 40k therebouts)

Do remember that the retailer earns a margin on the rolex (approximately 30%) and much more on the other watch (could be close to 60-70% as previously some house brands go on 40-50% discount before all these bundling started)

However now the market is down from the highs seen in 2022Q1

[brattzz]

continuous 3 days of buy backs by THG, 14-16 sept, ave price, $2.3x++,

Note there is a big bloc exchange on 16 sept, close to 7.96 million shares!!! (most likely FMR selling off and Tays buying in)

[dydx]

continuous 3 days of buy backs by THG, 14-16 sept, ave price, $2.3x++,

Note there is a big bloc exchange on 16 sept, close to 7.96 million shares!!! (most likely FMR selling off and Tays buying in)

The total volume transacted has been significantly higher that the shares bought back by the company. In particular, the big block transacted on 16Sep (last Friday) of close to 6.0m shares was via married deals put through after 5:00pm. It will be interesting to find out who bought the block and have such appetite.

[weijian]

Sharing some insights because you have been fantastic in sharing

Hi wj1984,

The honor of sharing should go to you and a few other VBs who first talked about the bundling effect becoming popular some time ago.

This is an insight that old follies like me, by just reading annual reports, will not be able to pick up.

Inventory is always an albatross around the neck for retailers. After figuring out that the bundling effect was going to address that to an extent, the investment thesis for THG became much simpler for me.

Finally thanks for providing more insight into bundling and more importantly, correcting my wrong statement. I had forgotten that the inventory turnover and GPM had improved by leaps and bounds due to bundling.

[brattzz]

For this week to Mid Nov 2022, there is a Short Term trading/buying opportunity window for THG,

1) FMR owns 4.67% (30th Aug 2022) and continues to sell in open market, to refocus on their primary markets in US/UK,

2) THG/Tays last aggressive buy-in 21st Sept was $2.38 / share, and buying has stopped, assumed Black out period from now to half yearly 2023 report announcement - Mid Nov 2022, THG/Tays unable to buy-in, (indirectly providing price support to the daily transacted prices)

4) We can see Shortists are at work actively/daily, transacted prices are reducing due to FMR's consistent selling and will continue to reduce daily!

5) This window presents a good reduced price buy-in opportunity for investors looking to own THG pending positive Mid Nov 2022 Half yearly 2023 results!

[weijian]

2) THG/Tays last aggressive buy-in 21st Sept was $2.38 / share, and buying has stopped, assumed Black out period from now to half yearly 2023 report announcement - Mid Nov 2022, THG/Tays unable to buy-in, (indirectly providing price support to the daily transacted prices)

Hi bratzz,
This assumption may not be right.

I checked SGX's rulebook on share buybacks and there is no black/white rule for "black out period". From Google, RegCo CEO Tan Boon Gin actually gave a "best practice reminder" back in 2018

Mr Tan said that as best practice, companies should refrain from share buybacks during the two weeks immediately preceding the announcement of quarterly financial statements, and one month immediately before the full-year financial statements

https://www.straitstimes.com/business/co...-and-donts (some of the best practices shared may explain YZJFH's share buy back behavior)

Looking back from now back to 2021, when share buy back started for THG, there has been 2 financial reporting dates:

FY22 Announcement: 26 May 2022.
Share buy back last date: 25 April 2022

1H22 Announcement: 12 Nov 2021.
Share buy back last date: 11 Oct 2021

So It is quite clear that THG-in-charge-of-sharebuyback has listened to the RegCo CEO. Historically, THG typically reports its 1H22 results in the 2nd week of Nov and so this means that there are 2-3 more weeks (from 21st Sept 2022) before the self imposed black out period.

As such, I think we can rule out the black out period as explanation for share buy back inactivity.

Then the question arises for its inactivity, especially in the last week of turbulent activity. My answer to this will be "it simply doesn't matter". As I have mentioned before in the YZJFH thread, share buy back is just an asset allocation exercise. It doesn't affect the business much. Share prices or support doesn't affect the business much. OPMIs are probably better off not getting their minds anchored on any share price, but only focus on the business and valuation.

[dydx]

For this week to Mid Nov 2022, there is a Short Term trading/buying opportunity window for THG,

1) FMR owns 4.67% (30th Aug 2022) and continues to sell in open market, to refocus on their primary markets in US/UK,

2) THG/Tays last aggressive buy-in 21st Sept was $2.38 / share, and buying has stopped, assumed Black out period from now to half yearly 2023 report announcement - Mid Nov 2022, THG/Tays unable to buy-in, (indirectly providing price support to the daily transacted prices)

4) We can see Shortists are at work actively/daily, transacted prices are reducing due to FMR's consistent selling and will continue to reduce daily!

5) This window presents a good reduced price buy-in opportunity for investors looking to own THG pending positive Mid Nov 2022 Half yearly 2023 results!

 

Thanks for pointing this out. It is indeed puzzling why the company suddenly stopped buying back shares since the last purchase on 21Sep22 and paid $2.38/share..
https://links.sgx.com/1.0.0/corporate-an...3e166b2272
For sure it cannot be due to lack of money!

Something is cooking?