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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<li>
<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> paid a 31-cent dividend in its H1FY23 result on the 16th, equating to an annualized dividend yield of 15% on the current share price.</li>
<li>The outlook for the rest of the year is much brighter, given the recovery in China and the inability of the Chinese to travel. October numbers were strong.</li>
<li>The stock trades at a 6.7x PE, with more than 50% of the market capitalization in cash.  In slightly better market conditions, this could be a 6 HKD stock.</li>
</ul>



Oriental Watch (398 HK) paid a 31-cent dividend in its H1FY23 result on the 16th, equating to an annualized dividend yield of 15% on the current share price.
The outlook for the rest of the year is much brighter, given the recovery in China and the inability of the Chinese to travel. October numbers were strong.
The stock trades at a 6.7x PE, with more than 50% of the market capitalization in cash.  In slightly better market conditions, this could be a 6 HKD stock.


Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally

<ul>
<li>After a disastrous April and May due to lockdowns resulting in &gt;-50% SSSGs, the company is seeing the situation stabilize in June and July.</li>
<li>We remain cautious on H1 2023, as margins and revenue will likely decline, with gross margins likely to drop 300-400 bps and revenues down 10-15% YoY.</li>
<li>Expect a generous dividend with over a 100% payout. Since &gt;50% of the market cap is in cash, a special dividend could also be expected. </li>
</ul>


After a disastrous April and May due to lockdowns resulting in &gt;-50% SSSGs, the company is seeing the situation stabilize in June and July.
We remain cautious on H1 2023, as margins and revenue will likely decline, with gross margins likely to drop 300-400 bps and revenues down 10-15% YoY.
Expect a generous dividend with over a 100% payout. Since &gt;50% of the market cap is in cash, a special dividend could also be expected. 


Oriental Watch Update: June and July Improve, Cautious H1 FY23

<ul>
<li>We have increasing confidence 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> paying out a &gt; 74 cent dividend for FY22 ( implied dividend &gt;40 cents for H2 2022, full-year yield 17%). </li>
<li>Current net cash (ex-of dividend payable) is 1.1 bn HKD accounting for &gt;50% of the market capitalization ( 2.1 bn HKD ), providing a significant margin of safety. </li>
<li>Expanding watch premiums for brands like Rolex and Patek Philippe due to tighter supply could result in better margins for the company, increasing upside potential.</li>
</ul>


We have increasing confidence in Oriental Watch (398 HK) paying out a &gt; 74 cent dividend for FY22 ( implied dividend &gt;40 cents for H2 2022, full-year yield 17%). 
Current net cash (ex-of dividend payable) is 1.1 bn HKD accounting for &gt;50% of the market capitalization ( 2.1 bn HKD ), providing a significant margin of safety. 
Expanding watch premiums for brands like Rolex and Patek Philippe due to tighter supply could result in better margins for the company, increasing upside potential.


Oriental Watch: Increasing Visibility on H2 2022

Despite a slight slowdown in August and September,  due to supply constraints from Rolex and Patek as well lockdowns in China due to Covid, we expect that <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> will announce a profit alert ahead of its result in November.
We continue to like <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>:
<ul>
<li>We believe that despite the last two months of difficulties, dividends for H1 2022 will still be more than 25 cents representing an annualized yield of 12% on the current share price.</li>
<li>We expect inventories to trend lower due to these supply constraints resulting in further cash conversion on the balance sheet and net cash levels remaining over one bn HKD (representing 50% of the current market capitalization).</li>
</ul>
Risks
<ul class="">
<li>Imposition of a luxury tax by the Chinese government.</li>
<li>Further severe supply curtailments by Rolex and Patek Philippe. </li>
</ul>

Despite a slight slowdown in August and September,  due to supply constraints from Rolex and Patek as well lockdowns in China due to Covid, we expect that Oriental Watch (398 HK) will announce a profit alert ahead of its result in November.
We continue to like Oriental Watch (398 HK):

We believe that despite the last two months of difficulties, dividends for H1 2022 will still be more than 25 cents representing an annualized yield of 12% on the current share price.
We expect inventories to trend lower due to these supply constraints resulting in further cash conversion on the balance sheet and net cash levels remaining over one bn HKD (representing 50% of the current market capitalization).

Risks

Imposition of a luxury tax by the Chinese government.
Further severe supply curtailments by Rolex and Patek Philippe. 


Oriental Watch - Expect a Positive Profit Alert for H1

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
<ul class="">
<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

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

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Oriental Watch (398 HK)

Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally

Oriental watch trades at a 6.7x PE with a >15% dividend yield and more than 50% of the market cap in net cash. Management was upbeat about H2 FY23...

Sameer Taneja

Oriental Watch Update: June and July Improve, Cautious H1 FY23

Oriental Watch is an attractive investment in the luxury watch space with >50% of its market cap in cash trading at a 15.4% dividend yield on FY23...

Sameer Taneja

Oriental Watch: Increasing Visibility on H2 2022

Trading at a 17% dividend yield with >50% of the market capitalization in cash, Oriental Watch is a compelling investment in the medium term.

Sameer Taneja

Oriental Watch - Expect a Positive Profit Alert for H1

Oriental Watch is a deep value stock with 50% of its market capitalization in cash and a dividend yield of over 12.5%. We believe the company is...

Sameer Taneja

Oriental Watch: Sit Tight and Stay On For Larger Dividends

Oriental Watch represents a good medium-term opportunity with a 7x FY22 PE multiple with more than 50% of the market capitalization in cash and a...

Sameer Taneja

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