Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

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<a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a>  went ex-dividend on the 4th of January and has settled at an appetizing valuation of 6.8x PE with 60% of the market cap in cash.</li>
<li>The market post-golden week and into the new year has been tepid.</li>
<li>We expect the company to continue paying out 100% of its profits as dividends, based on which the dividend yield is close to 14% at the current share price.</li>
</ul>



Oriental Watch (398 HK)  went ex-dividend on the 4th of January and has settled at an appetizing valuation of 6.8x PE with 60% of the market cap in cash.
The market post-golden week and into the new year has been tepid.
We expect the company to continue paying out 100% of its profits as dividends, based on which the dividend yield is close to 14% at the current share price.


Oriental Watch (398 HK): Ex-Dividend, Cash Levels To Mkt Cap at 60%, 6.8x PE, 14% Dividend Yield

Value Investing in Asia, Oriental Value

Oriental Value

Value Investing in Asia

<ul><li>Oriental Watch is a prominent luxury watch retailer in the Greater China region.</li><li>While the company offers various brands, the majority of its sales, over 80%, come from its core brands, particularly Rolex and Tudor, a sister brand of Rolex.</li><li>Over the past two years, Oriental Watch has benefited greatly from the strong popularity of Rolex watches and has rewarded its shareholders with a dividend payout of over 100%.</li></ul>

Oriental Watch is a prominent luxury watch retailer in the Greater China region.While the company offers various brands, the majority of its sales, over 80%, come from its core brands, particularly Rolex and Tudor, a sister brand of Rolex.Over the past two years, Oriental Watch has benefited greatly from the strong popularity of Rolex watches and has rewarded its shareholders with a dividend payout of over 100%.

<ul>
<li>We remain cautious on <a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a> despite the recovery in sales in June this year. Wealth destruction in financial markets could impact sales in the short term.</li>
<li>Having said that, the stock is extremely cheap at 6.7x FY23 earnings (-32% YoY from FY22), with more than one bn HKD in cash (60% of market capitalization). </li>
<li>With a generous payout ratio of &gt;100%, the stock trades at &gt;17% yield. We believe the company will dip into cash reserves to maintain a high yield.</li>
</ul>


We remain cautious on Oriental Watch (398 HK) despite the recovery in sales in June this year. Wealth destruction in financial markets could impact sales in the short term.
Having said that, the stock is extremely cheap at 6.7x FY23 earnings (-32% YoY from FY22), with more than one bn HKD in cash (60% of market capitalization). 
With a generous payout ratio of &gt;100%, the stock trades at &gt;17% yield. We believe the company will dip into cash reserves to maintain a high yield.


Oriental Watch: Trading at 17% Yield, 60% Mkt Cap in Cash

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<a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a> profit alert for &gt;350 mn HKD affirms our conviction on the increasing dividend (74 HKD cents for FY22, implying a 15.7% dividend yield). </li>
<li>Lockdowns in China (accounting for 67% of the revenue) cast doubt around how H1 2023 will shape up. </li>
<li>With cash &gt; 50% of market capitalization, we remain positive on the company maintaining its high dividend payout for FY23 despite weakness in H1. </li>
</ul>



Oriental Watch (398 HK) profit alert for &gt;350 mn HKD affirms our conviction on the increasing dividend (74 HKD cents for FY22, implying a 15.7% dividend yield). 
Lockdowns in China (accounting for 67% of the revenue) cast doubt around how H1 2023 will shape up. 
With cash &gt; 50% of market capitalization, we remain positive on the company maintaining its high dividend payout for FY23 despite weakness in H1. 


Oriental Watch: Good Results in the Bag, Cautious H1 2023

In his insight, <a href="https://www.smartkarma.com/profiles/nicolas-van-broekhoven-24a66c2d-bca4-4f5b-adda-c4e2bcc509f4" target="_blank" data-smartkarma-citation="accounts:1208" rel="noopener">Nicolas Van Broekhoven</a> has made a very compelling case to stay on in <a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a>.  I will attempt to make a case for why dividends could be larger in H1 FY22 than H1 FY21, which we believe could further catalyze the stock. Our rationale for the same is:
<ul>
<li>Recovery of Hong Kong. </li>
<li>Continuous strength in China.</li>
<li>The massive decline in costs HoH as we expect employee and staff bonuses to come down.</li>
</ul>
Risks and Concerns
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<li>The outbreak in Nanjing could temporarily disrupt sales in China.</li>
<li>The potential upcycle owing to the inability of people in China to travel will reverse at some stage resulting in the normalization of earnings.</li>
</ul>
With the stock trading at 7x PE FY22, around 50% of the market capitalization in cash, and an estimated dividend of greater than 40 cents HKD around the corner in H1 FY22 ( after the declaration of a final dividend of 39 cents HKD in H2 FY21 ) we believe there is good upside in <a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a>.

In his insight, Nicolas Van Broekhoven has made a very compelling case to stay on in Oriental Watch (398 HK).  I will attempt to make a case for why dividends could be larger in H1 FY22 than H1 FY21, which we believe could further catalyze the stock. Our rationale for the same is:

Recovery of Hong Kong. 
Continuous strength in China.
The massive decline in costs HoH as we expect employee and staff bonuses to come down.

Risks and Concerns

The outbreak in Nanjing could temporarily disrupt sales in China.
The potential upcycle owing to the inability of people in China to travel will reverse at some stage resulting in the normalization of earnings.

With the stock trading at 7x PE FY22, around 50% of the market capitalization in cash, and an estimated dividend of greater than 40 cents HKD around the corner in H1 FY22 ( after the declaration of a final dividend of 39 cents HKD in H2 FY21 ) we believe there is good upside in Oriental Watch (398 HK).

Oriental Watch: Sit Tight and Stay On For Larger Dividends

Hong Kong

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Goldlion Holdings Limited, through its subsidiaries, distributes and manufactures garments and accessories.  The Company also invests in properties and operates a commercial center with restaurants and a business center.

Emperor Watch & Jewellery Ltd retails luxurious branded watches, and offers design and sales of jewellery products.

International Housewares Retail Company Limited operates retail houseware retail stores. The Company offers customers a variety of houseware products in Hong Kong, Singapore, West Malaysia, China and Macau.

International Housewares Retail (1373 HK)

Symphony Holdings Limited, through its subsidiaries, manufactures and trades footwear products.  The Company also invests in properties.

Sa Sa International Holdings Limited, through its subsidiaries, retails and wholesales cosmetics. The Company also provides beauty and health club services to members.

Mulsanne Group Holding Limited offers omni channel branding and marketing services. The Company offers online advertising, social media campaign, and other services. Mulsanne Group Holding provides its services throughout China.

Auto Italia Holdings Limited distributes brand-name products including motor vehicles. The Company serves customers in Hong Kong, Macau, mainland China, and elsewhere in Asia.

Giordano International Limited, through its subsidiaries, retails and distributes casual apparel and accessories under theGiordano, Giordano Ladies, Giordano Junior, BSX and Concepts One brands.

Adairs Limited operates as a retailer of manchester and homewares. The Company offers bed linen, bedding products, towels, cushions, throws, books, homewares, wall art, and furniture.

NISSAN TOKYO SALES HOLDINGS CO., LTD sells new and pre-owned passenger cars and commercialvehicles produced by Nissan Motor mainly in central Tokyo area. The Company also sells car parts and provides maintenance service. NISSAN TOKYO SALES HOLDINGS also operates office building rental, car leasing service, and insurance service.  The Company's subsidiaries sell Jaguar and Renault cars.

Bell-Park Co., Ltd., is an independent primary dealer of Softbank mobile telephones and the related service subscription contracts.  The Company also markets land line and ADSL services and provides employment services.

Beijing Digital Telecom Co., Ltd. is a communication company that services The People's Republic of China.  The Company is a distributor of communications terminals and related services. It also retails mobile communications and digital products.

Hallenstein Glasson Holdings Limited owns and operates retail stores that sell men's, women's, and young men's apparel products and sportswear. The stores are located throughout New Zealand and Australia.

CHIYODA CO., LTD. operates specialty store chains including shoes stores, toy stores, and also casual clothe stores nationwide.  The Company sells its shoes under a number of store chains including The SHOES, Kutsu Chiyoda, and SHOE PLAZA.

FTGroup Co., Ltd. develops and sells telecommunication equipment such as business phones, facsimiles, and CTI (Computer Telephony Integration) products. The Company also provides maintenance services for its products. FTGroup works as an agency for telecommunication service carriers and also sells mobile phones through its franchises.

HARD OFF CORPORATION Co., Ltd. operates a chain of secondhand goods stores based in Niigata.  The Company buys and sells PCs, audio & visual products, cameras, musical instruments, watches, CDs, and game software.  HARD OFF operates its own stores and also franchise stores.

Singer Thailand Public Company Limited assembles and distributes Singer brand household appliances such as sewing machines, refrigerators, televisions, washing machines, stereos, VCRs and gas stoves.  The Company has its own retail network and offers installment financing to its customers.

LS Networks Co., Ltd. manufactures leather and athletic shoes, sports apparel, golf accessories, and leisure items.  The Company also operates a building leasing business.

Oriental Watch Holdings Limited, through its subsidiaries, trades watches and invests in properties.

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Oriental Watch (398 HK)