(03-06-2011, 06:34 PM)Nick Wrote: [ -> ]Will Mr Market continue to allow THG to trade above its NAV at a decent premium ?
For sure, Mr Market is not stupid, especially when more and more people become more informed about the virtues of THG as a business and as a potential good investment opportunity. Just imagine this: When more well-to-do consumers - tourists, and especially Singaporeans, PR's, including those super-rich - buy their branded or high-price for-collection watches from THG outlets, wouldn't at least some of them see and realize the great investment merits of the company THG?
As THG shares are already quite tightly held by mostly serious, value-based, and well-funded local investors, it will not need much new investors' interest and market capital for Mr Market to do its usual magic! Besides, many will be watching out for the coming FY11 AR and the payment date of the $0.05/share Final dividend for FY11.
(03-06-2011, 07:04 PM)dydx Wrote: [ -> ]As THG shares are already quite tightly held by mostly serious, value-based, and well-funded local investor
How can you tell that they are held mostly by such types of investors?
I suppose we can always start by taking a look into the statistics of shareholders. In the case of THG, based on the statistics as at 2Jun10 (in p80/81) in the last FY10 AR.....
http://www.thehourglass.com/AR/AR_16_1.PDF
, there were only 1,863 registered shareholders. If we take out the 122 under the category holding 1 - 999 shares (mainly those who had taken their dividends in scrip and sold their full-lot shares), and assume 1/3 of the 1180 under the category holding 1000 - 10000 shares belong to those small local shareholders who had bought their shares (mostly under their CPF accounts) years ago and may have 'forgotten' about their shares, we end up having approx. 1300 more 'active' shareholders in THG. Based on the same statistics, 86.78% of the total issued shares of 233.954m were held by the "Top 20 shareholders". Together with the details on directors' interests on p28 of the same AR, we can derive that the enlarged Henry & Jannie Tay family held a total 63.13% of THG. Among the "Top 20 shareholders", we can also know that 4.11% was held by the family of the late Tan Chin Tuan (under Siong lim P/L), 1.35% held by retired leading broker Donald Teo, and a few others less well-known with holdings ranging from 0.51% upwards, including quite a few under nominee names.
The above explains why THG has remained an illiquid stock for some years now, and we can verify this by looking at the historical prices and transaction volume.....
http://finance.yahoo.com/q/hp?s=E5P.SI&a...d&z=66&y=0
A relevant question: Would short-term speculators - day-traders and contra-traders - be attracted by an illiquid stock like THG? My answer: Unlikely!
The lack of active coverage by stockbrokers - partly because THG management doesn't believe in 'telling their story' too much, and prefer to let investors judge the company and based on their official results, themselves - also means that THG does not fall under the radar of most traders, including the hedge funds.
So what's the profile of the majority of THG shareholders? I believe the answer is quite obvious!
just curious, how will THG stack up against Sincere, now that Sincere has the backing of LVMH.
THG has hit a new recent high of $1.20 this afternoon (6Jun11). The buying today is exceptionally strong, and appears to have included the work of 1 or more institutions. If this is indeed true, it will be good for THG, as the company is finally shining both as a business and as a stock!
At $1.20, Mr Market now is prepared to pay a premium of approx. one year's earnings or EPS (based on the latest FY11's EPS of $0.181) over the latest NAV/share of $1.0651 (as at 31Mar11), on a cum-dividend - i.e. inclusive the coming $0.05/share Final dividend for FY11 - basis. A relevant question: Is this too demanding? My answer: Probably not.
Of course, investors in THG have to bear in mind that we are talking about a very well established and managed business that has a solid track record of above-average profitability in recent years, and that is poised to make good profits for more years to come. And investors also have to bear in mind that THG has a rock-solid B/S, including quite a bit of reserve property assets and cash.
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At the close today, THG closed at the day's high of $1.22 - up $0.11, or 9.9% - with a total of 698 lots transacted. Will the recent share price increase and the current price level move a lot more existing THG shareholders to turn sellers? We shall see in the next few days. My own gut feel is that it should not, because THG is a gem-grade company!
The Apr11 Singapore Retail Sales Index released yesterday makes interesting reading.....
http://www.singstat.gov.sg/pubn/business/mrsapr11.pdf
In particular, the Apr11 Index for the Watches & Jewelley shows a very encouraging sign for the sector -
(a) On a Month-on-Month basis (i.e. Apr11 vs. Mar11), it is up 11.5% at current prices, and up 13% at constant prices. [refer Table 1 in p11] This is a solid performance for current business volume increase!
(b) On a Year-on-Year basis (i.e. Apr11 vs. Apr10), it is up 29.6% at current prices, and up 18.3% at constant prices. [refer Table 3 in p12] This shows a solid increase in business volume, as well as a healthy increase in retail prices in the past 12 months.
© The highly positive trend for business volume increase is also clearly discernible in the seasonally adjusted index from Table 1A in p15, and in the percentage change in the monthly index over corresponding period in previous year from Table 3 in p18.
From these, it does appear THG is poised to again do very well in this FY12.
Dydx, I really enjoy reading your posts and threads.
I quite agree with your views on Hour Glass.
Its a great company that's expanding well, has little debt and generates a ton of cash every year, even in 2009!
What I like more however, is the intangibles of the business. It has build a strong brand name for itself. Also, in my view, many of these buyers tend to be repeat customers. When your dealing with goods that are this expensive, reputation is everything.
Thanks dydx for the valuable analysis!
I notice that there are more luxury watch companies, setting up their own specialty shops here. In the past, they usually give the distributorship to companies like THG, Cortina, etc. But as the asian market expands, there seems to be a shift in strategy. Would it impact the THG in the long run?
In the past, departmental stores like Metro are doing well. But since companies like Hush puppies, Braun buffel, Nike, etc begin launching their own shops, departmental stores' appeal dropped.
Hope to hear your views!
(20-06-2011, 09:46 AM)Thriftville Wrote: [ -> ]I notice that there are more luxury watch companies, setting up their own specialty shops here. In the past, they usually give the distributorship to companies like THG, Cortina, etc. But as the asian market expands, there seems to be a shift in strategy. Would it impact the THG in the long run?
Based on what I can observe, owners of luxury watches adopt different distribution strategies, and some for different markets. While some of them have chosen to maintain wholly-owned subsidiaries in Asia to undertake own local/regional wholesale, distribution, and marketing/advertsing functions, most of them do not own/operate their own retail outlets. I believe most of the single-brand luxury watch retail boutiques are owned by independent retailers like THG, either on exclusive or non-exclusive basis. E.g. THG distributes/retails Hublot watches in Singapore, Malaysia and Thailand on an exclusive basis, and has established single-brand Hublot flagship boutiques in Singapore and Malaysia, on top of selling Hublot watches in all THG outlets in these 3 countries. For Rolex, while this popular brand is sold in nearly all established luxury watch retailers on a non-exclusive basis, THG was given the right to operate a single-brand Rolex boutigue in Ion Orchard (located on the ground floor near the Prada boutique).
Apart from investing in retail outlets at good and strategic locations, another 2 key successful factors for THG are smart merchandising and good inventory control.
Swiss watchmaking in May 2011
Strong rise continues unabated
The Swiss watch industry made great strides in May with a second consecutive month of growth in excess of 30%. Watch exports attained a value of 1.6 billion francs, an increase of 31.6% compared to May 2010. For the first five months of the year the result stands at 7.1 billion francs (+21.7%).
Gold watches were much in demand and registered a very strong performance, both in value and volume terms. Steel timepieces set the general trend. The category of other materials recorded a steady rise, generating a high level in volume terms.
Watches costing less than 200 francs (export price) posted the highest increase, approaching 40%. Contrary to previous months, results for the 200-500 franc category were the least impressive, albeit posting an increase of 20%. Timepieces costing more than 500 francs recorded very solid growth both in value and volume terms.
The main markets showed a clear upward trend in May. Hong Kong maintained its high rate of growth. The United States saw their growth accelerate, while China slowed slightly despite an increase of more than 45%. In sixth position, Singapore (+44%) followed the same dynamic as China. In Europe, France, Italy and Germany also had an excellent month of May.
Source: FHS
Swiss watchmaking in April 2011
Very strong rebound
The month of April proved very favourable for Swiss watch exports. Their value increased particularly strongly by 32.1% to a level of 1.6 billion francs, well ahead of the excellent performance recorded in 2008. The moving average over twelve months bounced back with a rate of 22.6%.
Steel and gold watches contributed greatly to this result. Bimetallic timepieces also performed well despite being situated slightly below the average. In volume terms, steel watches set the pace with an increase in excess of 20%. Volumes in the category of other materials recorded an even more pronounced rise.
Wristwatches costing less than 200 francs (export price) registered gains of almost 20% by volume and by value compared to April 2010. Above 200 francs, all segments recorded increases greater than 30%.
Growth was very high on many important markets. Hong Kong re-established the high rates of growth registered in 2010. The United States benefited from a favourable base effect to increase its value by nearly 50%. France maintained its steady pace, while Italy remained at a moderate level. China meanwhile proved very dynamic despite comparison with an exceptionally good April in 2010 (+150% compared to 2009). Singapore recorded one of the highest increases of all. Against all expectations, Japan, in seventh position, showed an upturn in excess of 40%.
Source: FHS
Swiss watchmaking in March 2011
Net growth despite a high base of comparison
Swiss watch exports continued to grow in March despite an extremely unfavourable base effect. After the increase of 37.9% posted in March 2010, exports recorded a rise of 11.1% in March 2011, achieving a total of 1.4 billion francs. Thanks to good results over three months, the first quarter (3.9 billion francs) was up 14.7% compared to January-March 2010, exceeding the level recorded in 2008.
Steel watches saw their value increase at slightly above the average rate. Gold timepieces also showed a steady rise, as did bimetallic watches. The increase in volume terms outstripped the rise in the value of watches. This was the case in particular for steel and bimetallic products, which stood out on account of their marked growth. The category of other metals and other materials also recorded a positive result.
Watches costing less than 200 francs (export price) continued their steady upward trend in March. Between 200 and 500 francs, timepieces consolidated their already impressive performance with increases of nearly 40%. More expensive watches maintained a slightly lower profile.
The 500-3,000 francs category recorded a 9.0% upturn in the number of timepieces, while in value terms the increase was only 3.3%. Above 3,000 francs, the increase by value and by volume was nearly 10%.
Watch exports to Hong Kong rose spectacularly in March. In parallel, China recorded a particularly impressive rate of increase, despite a very unfavourable base effect. Still showing an uneven development, the United States saw their value fall for the first time in more than a year. France maintained its single-digit growth, while its neighbours Italy and Germany fared less well than in March 2010. In sixth position, Singapore exceeded its previous year’s level.
Source: FHS
Swiss watchmaking in February 2011
Stable growth
The rate of growth of watch exports in February remained high and comparable to that of January. The sector exported the equivalent of 1.4 billion francs, exceeding by 17.8% the result posted one year previously. It thus recorded the best month of February in its history.
Steel watches supported this strong growth, as well as gold timepieces. Bimetallic watches on the other hand slowed considerably. The rise in the total number of units was even more pronounced than the increase in value, with the category of other materials in particular recording a very strong upturn.
Watches priced at between 200 and 500 francs (export price) have registered a rising trend for a year and a half. Their rate of increase was more than 60% in February. Timepieces costing less than 200 francs and more than 3,000 francs were on a par with the average for the sector, while the 500-3,000 francs category recorded a lesser increase (+6.6% by value), in keeping with signs of a slowdown over recent months.
The Swiss watch industry’s main markets all performed well in February with the top six in particular recording two-digit rates of growth. After a somewhat unrepresentative variation in January, Hong Kong resumed its strong upward trend. The United States stabilised at a rate of growth close to 20%. China recorded one of the steepest increases, mirrored by France, albeit on account of products in transit. Singapore slowed slightly, while remaining at a high level. Italy and Germany recorded more moderate increases.
Source: FHS
Swiss watchmaking in January 2011
Good start to the year
Watch exports started the year 2011 in very good shape. In January, their value was 1.1 billion francs. This figure exceeds by 16.9% the result for January 2010, the month in which watch exports began their recovery after a marked decline in 2009.
Exports of gold watches stood out by an increase of twice the average rate, while steel watches lagged slightly behind.
In volume terms, the rate of increase for the category of other materials was also well above that of other finishes. In total, Swiss watch manufacturers shipped 300,000 more timepieces abroad than in 2010.
Watches costing less than 200 francs (export price) followed the average trend and clearly influenced the overall rise in the number of timepieces exported. The 200-500 francs category continued its very steady progression, while the 500-3,000 francs segment showed little change compared to 2010. Timepieces costing more than 3,000 francs saw their value increase by 25.1%.
Watch exports to Hong Kong dipped after 13 months of steady increases. This is no doubt an isolated variation, with little significance for the general trend, which remains very good on this market and is set to continue in 2011. Indeed other Far Eastern markets such as China, Singapore and South Korea recorded double-digit rates of growth. January was also an excellent month for the United States. In Europe, France registered high growth, largely attributable to transit, while Italy showed a downturn (-5.0%) and Germany stagnated (+0.6%). In the Middle East, the United Arab Emirates recorded one of the highest increases on the planet.
Source: FHS