ValueBuddies.com : Value Investing Forum - Singapore, Hong Kong, U.S.

I have exact same sentiment as you!

I have been searching through the HKEx to look for similar listed watch companies which would be useful to benchmark against THG, and here is the fisrt one that I have found

Emperor Watch and Jewellery: http://www.emperorwatchjewellery.com/en/home.php

It is not a 100% watch company but 82% of its total revenue came from sales of watches. Its slides presentation and AR contain some interesting figures such as watches are more expensive in Singapore than in Hong Kong/Macau etc. Wondering how true is this ?

It is interesting to note that the top executives of THG are "over paid" compare to this company. The top 5 most highly paid executives of Emperor received a total amount of HKD 11.1 million = SGD 1.8 million ( it was SGD 7 million plus for the top 4 executives of THG ). Revenue and net profit in absolute terms are higher than that of THG as well. The difference is very significant, it amounts to over 2.0 cents per share !!!!!!!!!!

http://www.emperorwatchjewellery.com/sha...s1page.pdf

http://www.emperorwatchjewellery.com/sha...1%20AR.pdf

(04-07-2012, 07:55 PM)Boon Wrote: [ -> ]I have been searching through the HKEx to look for similar listed watch companies...

Hi Boon, You may want to check Hengdeli. From a 2011 HSBC report: "Hengdeli believes it controls about a 35% market share of watch distribution for Greater China with a footprint of 279 multi-brand stores and 71 mono-brand boutiques they run as a franchisee for the brands....Swatch holds a 9.05% stake in Hengdeli whilst LVMH holds 6.33%". Unlike THG they sell a lot of 'cheap' watches; for luxury watches they only have 12 "Elegant" stores.

Myself, I prefer Richemont or Swatch.

(04-07-2012, 09:51 PM)BlackCat Wrote: [ -> ]

(04-07-2012, 07:55 PM)Boon Wrote: [ -> ]I have been searching through the HKEx to look for similar listed watch companies...

Hi Boon, You may want to check Hengdeli. From a 2011 HSBC report: "Hengdeli believes it controls about a 35% market share of watch distribution for Greater China with a footprint of 279 multi-brand stores and 71 mono-brand boutiques they run as a franchisee for the brands....Swatch holds a 9.05% stake in Hengdeli whilst LVMH holds 6.33%". Unlike THG they sell a lot of 'cheap' watches; for luxury watches they only have 12 "Elegant" stores.

Myself, I prefer Richemont or Swatch.

BlackCat,
Thanks. I am currently based in Shanghai and have seen quite a few of Hengdeli retail outlets around but didn't realise it has gone public.

I did take a look at another retail play listed in HK recently. The experts here should be familiar with the name, Dickson. The top 2 men in that company are also paid very well.

As for Emperor, could the key management also play roles in other Emperor group companies, hence the lower renumeration %?

I feel the demand for luxury goods will also go up more and more in Asia with rising wealth and prosperity. It's an enduring theme that won't go away. THG fits in pretty nicely with this theme, well-run management, solid brand name (intangibles that are not on the Balance Sheet), family-owned majority and one of few rare retail plays in SG left. The little free float is key obstacle to gaining wider following and coverage. I've held this counter for 4,5 yrs now and never really loses sleep over it. Slow and steady. I'm probably lucky I'm following it on its way up. I do count my blessings.

Once again, great discussion on this industry. I'm gaining so much from everyone. Thanks!

(04-07-2012, 07:55 PM)Boon Wrote: [ -> ]I have been searching through the HKEx to look for similar listed watch companies which would be useful to benchmark against THG, and here is the fisrt one that I have found

Emperor Watch and Jewellery: http://www.emperorwatchjewellery.com/en/home.php

It is not a 100% watch company but 82% of its total revenue came from sales of watches. Its slides presentation and AR contain some interesting figures such as watches are more expensive in Singapore than in Hong Kong/Macau etc. Wondering how true is this ?

It is interesting to note that the top executives of THG are "over paid" compare to this company. The top 5 most highly paid executives of Emperor received a total amount of HKD 11.1 million = SGD 1.8 million ( it was SGD 7 million plus for the top 4 executives of THG ). Revenue and net profit in absolute terms are higher than that of THG as well. The difference is very significant, it amounts to over 2.0 cents per share !!!!!!!!!!

http://www.emperorwatchjewellery.com/sha...s1page.pdf

http://www.emperorwatchjewellery.com/sha...1%20AR.pdf

The second HKEx listed watch company, as prompted by BlackCat, is Hengdeli

http://www.hengdeliholdings.com/eng/home/home.htm

http://www.hmdatalink.com/PDF/C01700/e03389(173).pdf

Using data from 2 SGX listed companies (THG and Cortina) and 2 HKEx listed companies (Emperor and Hengdeli), I then compute the ratio of the total remuneration of the top 5 Employees of each company to its revenue and net profit. See attached Excel file.

I know that the sample size is small, nevertheless, it shows something -"The top management of THG are comparatively overpaid".

Imagine, for every extra 2.84 million that the company is paying to the top management, net amount in their hands would be 2.27 million, as their marginal tax rate is 20%, 0.57 million would go to the goverment as personal income tax.

If this 2.84 million were to be paid out as devidend instead, it would have to be subjected to corporate tax rate of 17%. Therefore, 0.48 million would go to the goverment as corporate tax, leaving 2.36 million or 1.0 cent per share which could be distributed as tax-free dividend to shareholders.

Since the management controls 52.57% of the company, they would receive 1.24 million of dividend as well. In effect, there are only getting 1.03 million less, not 2.84 million.

However, by doing so,
-the net profit of the company would be higher
-the dividend payout would be higher
-the market would react more positively and all shareholders,and MAYBE including the majority shareholders as well, should feel more happy about.

Please comment and correct me if you found any mistakes. It could be just a wishful thinking.

(Vested)

(05-07-2012, 11:57 PM)Boon Wrote: [ -> ]Using data from 2 SGX listed companies (THG and Cortina) and 2 HKEx listed companies (Emperor and Hengdeli), I then compute the ratio of the total remuneration of the top 5 Employees of each company to its revenue and net profit.

You may want to include Oriental Watch (0398). They are relatively small in HK but about the same size as THG.

In p26 of the latest AR, the breakdown of directors' remuneration in FY12 shows:
(1) Group MD Dr Kenny Chan would receive above $2.5m, of which 80% is bonus (likely variable, and linked to THG Group's profit performance and him meeting his KPIs).
(2) ED Mr Michael Tay would receive between $2.0m to below $2.25m, of which 77% is bonus (likely variable, and linked to THG Group's profit performance and him meeting his KPIs).
(3) Executive Chairman Dr Henry Tay and Executive Vice Chairman Dato' Jannie Chan each would receive $1.25m to below $1.5m, of which 71% is bonus (likely variable, and linked to THG Group's profit performance and their meeting their own KPIs).
(4) 6 IDs (including 2 resigned/replaced during the year) would receive a total of $283.5k in fees.

In p78 under Note 30(b), it shows that total short-term employee benefits for all directors of THG in FY12 would amount to $7.8m (+14.6% over FY11's $6.804m). This is equivalent to 10.1% of THG's adjusted Group PBT of $77.138m (by adding back $7.8m to the reported PBT of $69.338m).

2 relevent questions: (1)What's the value of a proven, experienced and driven management team? and (2) What is the right and fair price to pay for their contonuous service and contribution to the business?

There are simply too many family members in the board as executive directors. To me, it would be better if some could serve as non-executive directors.

me walks into "The Hour Glass" at 2pm or so.. 1st observation, not many customers.. probably less than 5

staff: how may i help u? (or something along the line)
me: blah blah blah blah...
staff: blah blah blah blah...

(ok so they cant adjust my watch for me. asked me to send it in to LVMH.)

me: oh do you have the ceramic sub? 116610LN?
staff: do you mean the new sub with date? or the new big sub no date?
me: sub ceramic with date.
staff: oh we're sold out.
me: how about the new sub no date 114060?
staff: oh we are sold out of that as well. whenever we get stock, it gets sold immediately.
me: ok thanks (walks out with a grin)