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Tag: oriental watch

  • Oriental Watch bullish as sales

    Oriental Watch bullish as sales

    Oriental Watch (398 HK)announced it is proposing to buy back a maximum of 83 million shares at 3 HKD (249M HKD). This represents a premium over 57% vs the average 30-day closing price on HKex. Once the shares are bought back they will be canceled which will reduce total shares outstanding from 570 million to 478 million. A Special General Meeting (SGM) will be needed to approve the transaction, details of which are pending an official Offer Document. The full transaction has been covered by David Blennerhassett Oriental Watch (398 HK): Conditional Partial Offer 

    As long-time Oriental Watch followers let’s step back and assess what this means:

    • The controlling family’s stake will rise over 30% (depending on uptake 30.85-36.10%) but they won’t have to make a mandatory general offer as they have requested an exemption from HKex. Minority investors need to approve the transaction: we would advise minorities to vote IN FAVOR.
    • The founding family upping its stake at a significant premium to the latest stock price is bullish.
    • Even at 3 HKD, the shares trade far below their latest book value of 4.04 HKD.
    • With increased ownership management is now more incentivized to keep on paying large dividends going forward.
    • Mr. Market has been perenially mispricing Oriental Watch at negative enterprise value or barely above net cash over the last 5 years. As discussed at length in various previous insights we think this is wrong and the latest transaction again highlights the underlying value.
    • The company has returned 0.885 HKD/share in dividends over the past four years. When judging Oriental Watch’s share price performance please make sure you look up the total return on your Bloomberg.
    • Mainland China Rolex sales have been seeing YoY SSS increases of 40-80% since April (depending month to month). Once HK opens up SSS comps become very easy after 2019 (riots) and 2020 (Covid-19). Please re-read our insight on Oriental Watch being a way to play Rolex in China Oriental Watch: Bet on Rolex Demand in China/HK and Collect 12% Dividends While Waiting 
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  • Oriental Watch profit soars as Chinese shop at home instead of travel

    Oriental Watch profit soars as Chinese shop at home instead of travel

    Most readers would already be aware that Oriental Watch Holdings’ stock increased significantly by 37% over the past three months. As most would know, fundamentals are what usually guide market price movements over the long term, so we decided to look at the company’s key financial indicators today to determine if they have any role to play in the recent price movement. Specifically, we decided to study Oriental Watch Holdings’ ROE in this article.

    Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

    The ‘return’ is the profit over the last twelve months. That means that for every HK$1 worth of shareholders’ equity, the company generated HK$0.05 in profit.

    So far, we’ve learned that ROE is a measure of a company’s profitability. Depending on how much of these profits the company reinvests or “retains”, and how effectively it does so, we are then able to assess a company’s earnings growth potential. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

    On the face of it, Oriental Watch Holdings’ ROE is not much to talk about. We then compared the company’s ROE to the broader industry and were disappointed to see that the ROE is lower than the industry average of 8.5%. However, we were pleasantly surprised to see that Oriental Watch Holdings grew its net income at a significant rate of 42% in the last five years. So, there might be other aspects that are positively influencing the company’s earnings growth. Such as – high earnings retention or efficient management in place.

    Next, on comparing with the industry net income growth, we found that Oriental Watch Holdings’ growth is quite high when compared to the industry average growth of 8.5% in the same period, which is great to see.

    The basis for attaching value to a company is, to a great extent, tied to its earnings growth. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. Is Oriental Watch Holdings fairly valued compared to other companies? These 3 valuation measures might help you decide.

    The three-year median payout ratio for Oriental Watch Holdings is 45%, which is moderately low. The company is retaining the remaining 55%. So it seems that Oriental Watch Holdings is reinvesting efficiently in a way that it sees impressive growth in its earnings (discussed above) and pays a dividend that’s well covered.

    Moreover, Oriental Watch Holdings is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years.

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  • Reduced rents, high-end products help Oriental Watch stay in profit

    Reduced rents, high-end products help Oriental Watch stay in profit

    Listed Hong Kong timepiece retailer Oriental Watch Holdings has weathered the multiple crises of the last financial year to record a decrease in turnover of just 3.5 percent and a profit of US$12.9 million.

    While turnover was down to $303.6 million, gross profit was up by 7 percent to $83.2 million, “mainly due to the group’s positioning at the high-end luxurious watch market where our long-term customers maintain strong purchasing power, as well as our vigorous efforts in the control of inventory,” the company said in its results announcement.

    The net profit attributable to shareholders of $12.9 million was down by 27.5 percent, the decline largely due to impairment losses, an increase in the allowance for slowing-moving stock and decreasing sales due to Covid-19 in the first quarter of this calendar year. But the company warned the full impact of Covid-19 had not been represented in the 2020 year results.

    Chairman Yeung Ming Biu said the company had introduced “stringent cost-control measures, especially in rent costs” which were down by 15.7 percent to $18.7 million.

    “We have successfully negotiated lower rental rates and more flexible leasing terms, and hence lowering the overall rental cost. In addition, we conduct a regular assessment on the performance of all retail stores and close down non-performing ones to improve resources allocation. The Group will continue to closely monitor our stores’ performance as well as rental contracts in order to improve our efficiency and cost structure,” said Yeung

    Oriental Watch has 62 luxury watch stores in Greater China, 47 on the mainland, 11 in Hong Kong, three in Taiwan and one in Macau.

    By market, Oriental Watch achieved a 17.5-per-cent increase in sales on the mainland to $129.1 million, despite the declining consumer sentiment and the advent of the pandemic. In Hong Kong, year-on-year sales were stable despite the social unrest from June last year until the arrival of Covid-19. As a result, sales fell by 17.3 percent to $154.6 million.

    Sales in Taiwan and Macau grew slightly, but recorded a loss largely due to increased allowance for slow-moving stock.

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  • Oriental Watch issues profit warning

    Oriental Watch issues profit warning

    Slow-moving stock and falling sales due to the Covid-19 pandemic have prompted listed Hong Kong timepiece retailer Oriental Watch to issue a profit warning.

    The company has advised the stock exchange that net profit for the year to March 31 will fall by about 20 percent.

    Furthermore, for the two months ended May 31, the group’s revenue decreased by more than 10 percent compared with last year (when sales were impacted by social unrest in the territory).

    During the quarter to March, Oriental Watch has allowed for impairment of assets, plant and equipment and provisioned for “slow-moving watches”.

    “There has been no change in the group’s operation as a result of the Covid-19 outbreak and its financial position continues to be strong,” said chairman Yeung Ming Biu in the filing.

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  • Oriental Watch sales, profit holds firm despite turmoil

    Oriental Watch sales, profit holds firm despite turmoil

    Oriental Watch has shrugged off the impact of ongoing Hong Kong protests, with sales down a mere 1.1 percent and improved gross profit in the half-year to September.

    Sales totaled HK$1.168 billion (US$149 million), gross profit rose 10.4 percent to $318.2 million and profit attributable to shareholders was down 3.6 percent to $61.7 million.

    “The Hong Kong operation of the group held up well during the period against a backdrop of uncertain economic and social conditions,” said chairman Yeung Ming Biu.

    Oriental Watch operates 61 stores selling high-end watches, 46 of them in Mainland China, 11 in Hong Kong, three in Taiwan and one in Macau.

    Same-store-sales growth reached 11 percent in China where the company has established a solid foothold across tier-one cities such as Shanghai and Beijing, in the Guangdong province, and other cities such as Taiyuan, Nanjing, Changsha and Chengdu.

    Figures for Hong Kong were not highlighted in the group’s half-year results but overall luxury-goods sales fell by around 50 percent in the last quarter.

    Yeung said the group believes Hong Kong tourism will regain its footing in the near future, and remains “cautiously optimistic” for the longer-term retail market, especially for the high-end sectors.

    “Oriental Watch will continue to deploy appropriate strategies to elevate the productivity of existing stores, strengthen cost management and optimize its inventory profile, as well as enrich its

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  • Oriental Watch profit steady despite sales drop

    Oriental Watch profit steady despite sales drop

    Oriental Watch’s sales fell by 15.7 percent last year – but the company’s bottom line was only minimally affected, in part due to reduced rents.

    The Hong Kong-listed retailer says that while the number of mainland visitors to the territory recovered last calendar year, the China-US trade dispute had brought uncertainties to the market. Subdued consumer sentiment and currency rate fluctuations had also impacted on sales.

    Chairman Yeung Ming Biu said the company had focused on stringently controlling rent and other costs for the last five years. The group’s aggregate rental cost (excluding related property management fees) decreased by 4.1 percent in the year to March 31 to HK$162 million, accounting for 34 percent of the group’s overall operating expenses – almost one percentage point less than the previous year.

    That result despite relocating the company’s flagship store from 100 Queens Road, Central, to 50 Queens Road, in the heart of the city’s upscale boutiques.

    “The group believes that the change of location will further fuel the brand presence and the sales once it starts operation,” he said. “In addition, regular internal assessment on the performance of all retail stores and closedown of high-rent yet non-performing stores are also the group’s strategy for better resources allocation.”

    Group turnover last year was $2.437 billion, (US$312 million), with gross profit down just 0.7 percent to $603 million and gross profit margin up from 21 percent to 24.7 percent. Profit attributable to shareholders was $138 million, just 0.7 percent less than the prior year.

    Oriental Watch has 61 stores, 46 of them in Mainland China, 11 in Hong Kong, three in China and one in Macau.

    products and purchasing stock only when existing inventory depleted to a pre-agreed level. As at March 31, overall inventory was $824 million, down 17.7 percent from the $1.001 billion of a year earlier.

    “In parallel, the group has also continued to step up its efforts in adjusting and optimizing its brand portfolio, in order to stabilize the group’s overall sales performance and keep abreast of market trends. Oriental Watch will continue to maintain a lower inventory level for a better cash position and a sustainable business development in the future,” said Yeung Ming Biu.

  • Oriental Watch sales slide, but profit rises

    Oriental Watch sales slide, but profit rises

    Oriental Watch Holdings sold fewer watches in the six months to September, but at a higher margin, boosting profit by 39 per cent. Group turnover decreased by 21.7 per cent to HK$1.181 billion compared with $1.508 billion during the same period last year.

    Gross profit increased by 13.4 per cent to $288 million while gross profit margin increased to 24.4 per cent. Oriental Watch says rent negotiations contributed to lower overheads, helping profit attributable to shareholders rise 39.1 per cent to $64 million.

    As at September 30, the group operated 62 retail stores in Greater China: 11 in Hong Kong, one in Macau, three in Taiwan and 47 in Mainland China.

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  • Oriental Watch Holdings sales back up

    Oriental Watch Holdings sales back up

    Easing rents, the closure of unprofitable stores and a trimmed-down inventory all helped Oriental Watch Holdings record a 10-fold increase in profit in its latest quarter.

    In the six months to September 30, Oriental Watch increased its post-tax profit from HK$4.12 million last year to $45.93 million, on sales down marginally from $1.545 billion to 1.508 billion. Same-store sales rose 14 per cent year on year.

    At the end of the period the luxury watch retailer operated 63 retail and wholesale points (including associate retail stores) in greater China: 47 in Mainland China, 12 in Hong Kong, three in Taiwan and one in Macau.

    Chairman Yeung Ming Biu said the return of mainland tourists and improving business confidence.

    “Most importantly, the stabilising sales performance along with rent adjustment has also become one of the key drivers for the group this year, which provided greater improvement in profitability with less rent burden suffered compared to the past few years.”

    During the quarter, the company’s rent costs fell by 26 per cent to $84 million, now accounting for 36 per cent of overall operating expenses, compared with 45 per cent in the same period last year.

    “The group has successfully negotiated better rental rates and more flexible leasing terms for the lease renewal,” he said. “In addition, regular internal assessment on the performance of all retail stores and closedown of high-rent yet non-performing stores are also the group’s strategy for better resources allocation.

    “The group will continue to closely monitor the store performance and its efficiency and hope the above measures together with the rent adjustments can improve profitability of each store in the forthcoming years.”

    Inventory management

    Yeung Ming Biu said careful monitoring of inventory of high-ticket items and reordering only when predetermined stock levels were reached had seen inventory cut by 10 per cent over six months.

    Meanwhile, Swiss watch exports by value increased by 4.1 per cent into Hong Kong and by 17.2 per cent into Mainland China between January and September, indicating that demand for luxury watches has rebounded.

    “Looking ahead, the group remains cautiously optimistic on the business outlook of the luxury goods market and expects retail sales in Hong Kong will hold stable amidst the sustained recovery in visitor arrivals and the resilience of local consumption demand,” he said.

    Same-store sales growth in China rose 14 per cent increase during the quarter.

    “On the other hand, the retail market in Hong Kong has begun to turn up after having bottomed out and these have provided good preconditions for the group’s development in Hong Kong,” he concluded.

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  • Oriental Watch profit plummets

    Oriental Watch profit plummets

    Listed retailer Oriental Watch Holdings says its net profit fell 78 per cent in the year to March.

    The company, which had issued a profit warning earlier in the year, has been hit by the slump in demand for luxury watches from mainland Chinese, in turn a result of the mainland government’s clampdown on gift giving.

    OWH says its net profit fell to HK$5 million, (US$641,000) on turnover down 11 per cent to around HK$3.11 billion.

    The company said luxury brand shoppers had changed preferences and attitudes and blamed slimmer margins on intense competition from watch retailers competing for a shrinking customer base.

    Oriental Watch has 68 stores in mainland China, 13 in Hong Kong, three in Macau and three in Taiwan.