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: Sit Tight and Stay On For Larger Dividends

Oriental Watch - Expect a Positive Profit Alert for H1

Oriental Watch: Living in Isolation with My Patek and Rolex Is Just Fine

Oriental Watch: Deep Value and a Good H1 2021

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

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

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

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