Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Was on the buyside for 15 years, most recently at a medium-sized boutique asset management firm. I grew up in Europe, went to university in the US and have been living in Singapore for the last 7 years which has given me a broad scope on the world and investing in general.

Consider myself a generalist investor with a preference for small and mid-cap companies and special situations. However, a large cap that has gone temporarily out of favor might also pique my interest. 

My style of investing could be categorized as more of value investor, rather than growth at any cost. Learning from Charlie Munger on the importance of quality of a company has been of tremendous value over the years.I like businesses with real earnings, cash flows, dividends, book value and insider ownership.

Insight Provider

Oriental Watch: Deep Value and a Good H1 2021

Oriental Watch: Buying a Rolex in Milan or New York? No, Thanks We Will Get It in Shanghai & Beijing

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

Oriental Watch (398 HK): Conditional Partial Offer

Oriental Watch: Forget the Tender, Management Is Bullish and Dividends to Accelerate

Oriental Watch: Bet on Rolex Demand in China/HK and Collect 12% Dividends While Waiting

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

Equity Bottom-Up

<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> reported 1H21 results (March year-end) which demonstrated sales increasing 108% in mainland China but imploding in HK, Taiwan, and Macau. Profits from mainland China were up almost 300% as margins for particularly Rolex were extraordinary. Sales from China were 70% of total sales which is a massive reversal from a few years ago when HK made up 80% of revenues.Overall company revenues were +16.4% and pre-tax profits were +32.7%. The bottom line was impacted by the higher PRC Enterprise Tax rate.The company just completed a 14.55% buyback of its outstanding shares and subsequently canceled them. Shares outstanding have therefore fallen from 570.36 to 478.36 million shares. After this buyback is accounted for net cash on the balance sheet is 853M HKD (estimate). This equates to cash still being 70% of the market cap! Our expectation is that cash re-builds quickly to around 1 billion HKD and large dividends will continue.Management also raised the interim dividend slightly to 0.12 HKD. The stock goes ex-dividend on 8 December and payment is planned right before Christmas. Just the interim dividend alone yields close to 4.5%.Did you know that if one bought Oriental Watch after our first insight in December 2017,  reinvested all dividends, and participated in the partial tender offer your return would be 179%? Not bad for a "boring" HK watch retailer. Our Fair Value remains at 3.5 HKD or 40% upside from here.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/210/original/oriental%20watch%20total%20return%202017%20to%2025%20nov%202020.png?1606353118" class="editor-image img-responsive" data-smartkarma-image-id="174210"></figure></section>

Oriental Watch (398 HK) reported 1H21 results (March year-end) which demonstrated sales increasing 108% in mainland China but imploding in HK, Taiwan, and Macau. Profits from mainland China were up almost 300% as margins for particularly Rolex were extraordinary. Sales from China were 70% of total sales which is a massive reversal from a few years ago when HK made up 80% of revenues.Overall company revenues were +16.4% and pre-tax profits were +32.7%. The bottom line was impacted by the higher PRC Enterprise Tax rate.The company just completed a 14.55% buyback of its outstanding shares and subsequently canceled them. Shares outstanding have therefore fallen from 570.36 to 478.36 million shares. After this buyback is accounted for net cash on the balance sheet is 853M HKD (estimate). This equates to cash still being 70% of the market cap! Our expectation is that cash re-builds quickly to around 1 billion HKD and large dividends will continue.Management also raised the interim dividend slightly to 0.12 HKD. The stock goes ex-dividend on 8 December and payment is planned right before Christmas. Just the interim dividend alone yields close to 4.5%.Did you know that if one bought Oriental Watch after our first insight in December 2017,  reinvested all dividends, and participated in the partial tender offer your return would be 179%? Not bad for a "boring" HK watch retailer. Our Fair Value remains at 3.5 HKD or 40% upside from here.

1H21 Shows 108% Sales Growth in China; Bottom Line Hit by Higher Tax; Cash 70% of Market Cap