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

<ul>
<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

Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Earlier this month we had written about Oriental Watch having pivoted from a HK tourism play into a China domestic luxury spending play. Three years ago approximately 70% of its sales were generated in HK. In FY21 (financial year-end March 2021) approximately 70% is now generated in mainland China. We expect more of the same in FY22 as China borders will remain closed for another year according to various news reports.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/215/028/original/image_81657348551624511345072.png?1624511342" class="editor-image img-responsive" data-smartkarma-image-id="215028"></figure>Oriental Watch is a prime beneficiary of this trend as we estimate it is the largest importer and reseller of Rolex in mainland China. We expect FY21 trends to continue well into FY22 which means more large dividends to shareholders. Management rewarded shareholders with a final 0.39 HKD dividend (ex-date 24 September). This is on top of the interim dividend of 0.12 HKD paid earlier. On an annualized basis this 0.51 HKD dividend is the highest ever and an 11% dividend yield on the current stock price. Despite buying back 249 million HKD worth of its own stock in 1H21 (partial tender at 3 HKD/share) the cash position actually grew YoY. The inventory position also declined further. Despite all this the company is trading at very cheap levels as 48% of the market cap remains cash and ex-cash the P/E is just 5.5x. For investors who bought in December 2017, when we first wrote about the company, the total return in Oriental Watch is now close to 240%. Not a bad return for a boring watch retailer in a sunset industry.In a 0% interest world investors looking for consistent yield would be wise to consider having Oriental Watch in their portfolio. We raise our Fair Value to 6 HKD (see details below).The biggest risk to Oriental Watch is that Rolex or Patek Philippe upset the Chinese government/consumers (think H&amp;M recently) which would lead to boycott of either brand.

Earlier this month we had written about Oriental Watch having pivoted from a HK tourism play into a China domestic luxury spending play. Three years ago approximately 70% of its sales were generated in HK. In FY21 (financial year-end March 2021) approximately 70% is now generated in mainland China. We expect more of the same in FY22 as China borders will remain closed for another year according to various news reports.Oriental Watch is a prime beneficiary of this trend as we estimate it is the largest importer and reseller of Rolex in mainland China. We expect FY21 trends to continue well into FY22 which means more large dividends to shareholders. Management rewarded shareholders with a final 0.39 HKD dividend (ex-date 24 September). This is on top of the interim dividend of 0.12 HKD paid earlier. On an annualized basis this 0.51 HKD dividend is the highest ever and an 11% dividend yield on the current stock price. Despite buying back 249 million HKD worth of its own stock in 1H21 (partial tender at 3 HKD/share) the cash position actually grew YoY. The inventory position also declined further. Despite all this the company is trading at very cheap levels as 48% of the market cap remains cash and ex-cash the P/E is just 5.5x. For investors who bought in December 2017, when we first wrote about the company, the total return in Oriental Watch is now close to 240%. Not a bad return for a boring watch retailer in a sunset industry.In a 0% interest world investors looking for consistent yield would be wise to consider having Oriental Watch in their portfolio. We raise our Fair Value to 6 HKD (see details below).The biggest risk to Oriental Watch is that Rolex or Patek Philippe upset the Chinese government/consumers (think H&amp;M recently) which would lead to boycott of either brand.

Oriental Watch: Great 0.39 HKD Final Dividend; With China Closed off from World Expect More of Same

Hong Kong

Glorious Sun Enterprises Limited, through its subsidiaries, retails and exports casual wear apparel.  The Company also manufactures casual wear products and trades fabric.

Dickson Concepts (International) Limited, through its subsidiaries, sells watches and fashion products.  The Company also trades luxury goods, and provides management and technical services.

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.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

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: Great 0.39 HKD Final Dividend; With China Closed off from World Expect More of Same

Oriental Watch delivered another set of solid results and a large dividend for FY21. With China closed for travel for another year we expect more...

Nicolas Van Broekhoven

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)