The Hour Glass

[Nick]

I was pleasantly surprised to find Annual Reports dating back to 1989 in their corporate website. It will certainly be interesting to trace their corporate developments over the past two decades.

http://www.thehourglass.com/?page_id=312 [Annual Report IR]

[Boon]

"Exports to Hong Kong in June were up 21.2 percent. It was about the same in May (but the monthly data has disappeared from the web). It was about the same every other month this year. They keep upping the exports to Hong Kong.
But Hong Kong also has sales tax data which comes from the sales tax receipts. There is in the data a series for "Jewellery, watches, clocks and valuable gifts" by both value and volume. The value series - relatively flattering, has monthly sales (versus previous corresponding period) for the last six months as:

+18.3%
+14.1%
+18.4%
+15.1%
+2.9%
+3.1%

Sales growth stopped. However exports to Hong Kong kept up (note that 21.2 percent figure above).

The volume growth actually went negative - being negative 3.4 and 3.1 percent for the last two months."

Source:
http://brontecapital.blogspot.sg/2012/08...ullet.html

________________

No comment; just FYI.

I think John of Brote Capital got some of his figures wrong.

Export to HK in June 2012 = 404 million CHF
Export to HK in May 2012 = 407.6 million CHF
Export to HK in June 2012 is 28% higher than in June 2011
Therefore, from May 2012 to June 2012, it is down by (-0.88%)

On half-yearly basis,

Export to HK from Jan to Jun of 2011 = 1,730 million CHF
Export to HK from July to Dec of 2011 = 2,355 m CHF
Export to HK from Jan to June of 2012 = 2,175 m CHF (-7.6%) compare to the previous 6 months.
For the last 6 months (Jan to June of 2012), the figures have been trending down and not upping every months as John says.

[wsreader]

Hi dydx
For a quick valuation, do u always use 6x FCF or it depends on the industry?

[dydx]

Hi dydx
For a quick valuation, do u always use 6x FCF or it depends on the industry?

The multiple applied on FCF (or NP, if it is considered a better basis) as a way to estimate the fair value of a business will depend on an investor's own judgement, after taking into consideration the quality of the business, its further growth potential, the quality/volatility of its earnings, the quality of its management, market reputation and goodwill (including the extra value in the brands, customer base, and supply chain), etc. The investor's own risk appetite will also have a bearing in deciding the appropriate multiple to be used.

In the case of THG, 6x FCF is equivalent to approx. 6.5x NP - by normal yardsticks, these multiples are considered very conservative for a well established business. Apart from all the factors described in the above para, I used a multiple of 6x on the latest FY12 (ended 31Mar12)'s FCF, because FY12 was a very profitable year for THG, and I felt the 30% yoy increase in NP was a little exceptional and the same high rate of increase may not just repeat in FY13 onwards.

[crabcrab]

The Hour Glass ($1.455) - A retail veteran once said that to value a retail business, the most direct is said to be the equivalence of one year sales that the business is generating. (This merely served as a guideline)

[Pursuitofknowledge]

The Hour Glass had just posted their First Quarter Result!

[Contrarian]

Someone told me the executive directors in HG each gets >S$2M...

[dydx]

1Q result just out.....
http://info.sgx.com/webcoranncatth.nsf/V...A0017FD28/$file/THGL_1Q_FY2013_for_SGX.pdf?openelement
Notwithstanding the flat revenue - which is fully understandable this time round, and bearing in mind it is not the style of THG to push for business volume at the expense of profit margin - PBT and NP actually increased smartly by 10% and 8% yoy, respectively.

And as a show of great confidence in the further growth of the business, THG even added $41.6m worth of new inventory - substantially funded by a $36.0m increase in bank borrowings - in 1Q, in preparation for the retail network expansion. Presumably our smart THG management has taken advantage of good discounts on bulk purchases offered by the European principals, and the prevailing weakness of the EUR.

[shanrui_91]

Someone told me the executive directors in HG each gets >S$2M...

Group MD is paid above $2.5m, Executive Director is paid $2m to $2.25m, Executive Chairman and Vice-Chairman are paid $1.25m to $1.5m and the rest of the independent directors are paid less than $250k.

The result is line with my expectation given that they are preparing for the opening of "More Passion" in September 2012 and Hong Kong Store in November 2012.

Revenue is flat which shows the dark clout ongoing but this should not be a great concern as we see a 35% growth in export to Singapore in June 2012 as compared to previous months. Contrary to what they did in 2008 to destock, the company has lowered its inventory turnover for the opening of new stores which signals some confidence in term of outlook.

The only line that puzzled me is Salaries and Employee Benefits which has dropped by 8% to $7.85m, a level unseen since FY 2012. This should have been much higher given that the new hires for the new stores are being trained at least 6 months before they start work. I wondered if this is due to credits from some govt job scheme.

(vested)

[d.o.g.]

Inventory as at 30 Jun 2012 is way above normal levels. The last 5 years, it was usually between 150-180 days for every quarter. Now it is 236 days which suggests that sales have slowed. June is normally a low period anyway, but usually the decline versus March is only around 10%. This time the drop is 30%.

Looks like Southeast Asia is not immune to the global slowdown either.